2019 Annual Report BCV at a Glance
2019 Annual Report BCV at a glance
2019 highlights
We delivered very solid results despite the ongoing • We maintained or slightly adjusted our financial negative-interest-rate environment targets: we are still targeting a cost/income ratio of • Volumes expanded across the Bank’s key business 57%–59% and a CET1 ratio of at least 13%; our ROE sectors, and revenues rose 3% to CHF 1.0bn. target based on this minimum target CET1 ratio is • Operating profit increased 4% to CHF 419m, now 13.5%–14.5%. reflecting continued firm cost control. • The Board of Directors is recommending that • Net profit was up 4% to CHF 363m. A CHF 1 increase shareholders approve a 10-for-1 stock split, in order to in the dividend to CHF 36 per share will be proposed enhance the liquidity of BCV’s share. at the next Annual Shareholders’ Meeting. We signed the United Nations Principles for Responsible BCV’s credit ratings were reaffirmed by the two main Investment (UNPRI) rating agencies, underscoring our financial solidity • In becoming a signatory, we have committed • Standard and Poor’s reaffirmed our AA rating, and to six principles that range from incorporating Moody’s reaffirmed our Aa2 rating, both with a environmental, social, and governance (ESG) criteria stable outlook. BCV is one of the best-rated banks in into our investment analyses, to reporting on our the world without an explicit government guarantee. responsible investment activities annually and promoting the principles within the financial sector. We paid out CHF 301m to our shareholders The UNPRI are the world’s leading framework for • In accordance with our dividend policy, which was responsible investment and provide an important extended in 2018, BCV paid an ordinary dividend platform for stakeholder engagement. of CHF 35 per share to shareholders in May 2019, corresponding to a CHF 2 increase relative to the previous year. This CHF 301m payout, together with the appreciation in our share price, equates to a total return of 11.3% in 2019.
We developed a new strategic plan, vista • Building on the positive results of our previous strategic plan, stratégie2018, we defined several areas where we will focus our efforts to meet future challenges. In particular, we plan to further improve our service quality and continue enhancing our distribution channels – branches, digital services, and call centers – in order to give customers an integrated multichannel experience. We also intend to capture more of the cross-selling potential inherent in our universal bank business model, and to increase our attractiveness as an employer. Key figures – 5-year overview
Balance sheet (in CHF millions) 2015 2016 2017 2018 2019 Total assets 43 418 44 085 45 415 47 863 48 352 Advances to customers 29 457 29 849 30 233 31 756 32 768 Customer deposits 28 877 29 245 30 512 31 375 33 048 Shareholders' equity 3 397 3 420 3 457 3 522 3 586
Assets under management (in CHF millions) Assets under management 87 972 85 382 86 490 87 620 97 840 cash and cash equivalents 24 900 26 009 26 977 28 062 29 837 investment funds 21 164 19 812 21 807 21 817 25 217 shares 22 891 21 588 19 871 18 485 20 934 bonds 13 156 11 029 9 764 9 413 9 746 other 5 861 6 945 8 071 9 843 12 106
Headcount Full-time equivalents 1 947 1 943 1 922 1 896 1 921
Income statement (in CHF millions) Total income 1 026 967 967 977 1 002 Operating expenses 514 509 508 500 505 Depreciation and amortization of fixed assets and impairment on equity investments 76 72 70 69 71 Other provisions and losses 37 3 1 5 7 Operating profit 399 383 387 403 419 Net profit 336 310 320 350 363
Liquidity and capital ratios1 Liquidity Coverage Ratio (LCR) 111% 113% 121% 113% 129% Leverage Ratio 6.7% 6.6% 6.5% 6.2% 6.3% Tier 1 capital ratio2 18.3% 17.5% 17.1% 17.1% 17.1% Total capital ratio2 18.4% 17.6% 17.3% 17.2% 17.3%
Income ratios Operating profit/average shareholders' equity 12.0% 11.4% 11.4% 11.6% 11.9% Cost/income ratio3 57.2% 59.4% 58.3% 57.6% 57.7% Operating profit per employee (in CHF thousands) 205.5 197.1 201.6 211.8 219.3 ROE 10.1% 9.1% 9.4% 10.1% 10.4%
Credit ratings Standard & Poor's Long term AA / stable AA / stable AA / stable AA / stable AA / stable Short term A-1+ A-1+ A-1+ A-1+ A-1+ Moody's Long term Aa2 / stable Aa2 / stable Aa2 / stable Aa2 / stable Aa2 / stable Short term Prime-1 Prime-1 Prime-1 Prime-1 Prime-1
1) More detailed information on Group and parent company liquidity and capital ratios can be found in the Basel III Pillar 3 report, which is available at www.bcv.ch and on the BCV Investor Relations iPad app. 2) To facilitate like-for-like comparison, the ratios for 2015 and 2016 have been recalculated without subtracting the countercyclical buffer from regulatory capital, in accordance with FINMA Circular 2016/1 “Disclosure – banks” 3) Excluding goodwill amortization and write-downs
PB 2019 Annual Report 1 Here are some examples of how we’ve executed on our commitment to corporate social responsibility
1 of 2 people in Vaud We provide 1 of 3 bank with BCV mortgage loans in Vaud Over 60% of our customers use our digital banking services
32 37 High-school Trainees graduates Personal banking advisors 18 Staff University interns
1 of 2 Vaud small businesses 7 of 10 Vaud pension funds bank with BCV count on BCV 92 new businesses financed
-3% We back 650 events Paper use and associations We work with over 600 local vendors
For more details on CSR at BCV please see our 2019 Sustainability Report. 2 2019 Annual Report 3 Our reports
2019 Annual Report Pillar 3 Report
This report contains BCV’s consolidated and parent- Our Pillar 3 Report provides investors, analysts, rating company financial statements. It also provides information agencies, and regulators with in-depth information on risk on our activities in 2019, including a review of each of our management at BCV, including detailed information about business sectors and an overview of the overall economic the Bank’s capital adequacy, risk-assessment methods, and environment. You will find other key information as risk levels in 2019. The report was drawn up in accordance well, especially in the chapters on risk management and with the Pillar 3 disclosure requirements set forth in the corporate governance. Basel III Accord and in Circular 2016/1 “Disclosure – banks” issued by the Swiss Financial Market Supervisory Authority (FINMA). The Pillar 3 Report is issued on a half-yearly basis 2019 Sustainability Report with reporting dates at 30 June and 31 December.
Our Sustainability Report provides a detailed look at the progress we made and the steps we took as a responsible corporate citizen in 2019. It offers a broad, transparent view of what we are doing to fulfill our commitment to promoting economically, socially, and environmentally sustainable development. The report is drawn up in line with the Global Reporting Initiative standards (www. globalreporting.org), which are the worldwide reference for reporting on sustainable development issues.
Most bn recommended bank in Vaud 2018 Taxes and dividend payments to Vaud Standard & Poor’s canton and municipalities – last 10 years 2019 rating Source: LINK Institut, 2019, recommendation to a friend Survey of 1,646 Vaud residents, representative of the population
2 2019 Annual Report 3 Vevey was once again host to the Fête des Vignerons is part of UNESCO’s intangible cultural heritage. For three winegrowers’ festival in 2019. The town pulled out all the weeks, locals and visitors alike mingled with a plethora of stops for the festival’s 12th edition, with 20 shows, 5,500 joyfully made-up characters, sparkling costumes, animals, and performers, 355,000 tickets sold, and close to a million visitors. enormous insects as they wandered around town or took a From 18 July to 11 August, the streets of Vevey were filled seat at one of the 50 or so food stands and restaurants. with shows, processions, and a wide range of musical and cultural performances. The market square was transformed As in previous editions, BCV was an official sponsor of into a vast arena with space for 20,000 spectators – all eager the Fête des Vignerons in 2019 as well. We are committed to see the enchanting show and especially the grand finale in to supporting cultural activities and major events in our which winegrowers are crowned. canton, so it made sense for us to be one of the main partner companies for this once-in-a-generation celebration of Vaud Outside the main arena, the whole town became an open wines and winegrowers. A large number of BCV employees stage with events from dawn to dusk. The Fête des Vignerons were also involved either as volunteers or walk-on performers. has been held approximately every 20 years since 1797. It’s Dressed as bannerets, leaf-pickers, and buds, they spared no a symbolic event in Vaud Canton and further afield – and effort in ensuring that the festival was a success.
4 2019 Annual Report 5 Contents
Letter from the Chairman and the CEO 6 Financial Statements 104 Report on the Consolidated Financial Statements 106 Who We Are 10 Consolidated Financial Statements 111 Overview of BCV 10 Parent Company Financial Statements 164 The BCV Share 14 BCV - our Missions 18 Organization Chart 194
Year in Review 30 Retail Network 196 Economic Environment 30 BCV in 2019 42 Regional Managers 197 Business Sector Reports 48 Branch Offices 198 Risk Management 58 General Approach 58 Credit Risk 60 Market Risk 62 Operational Risk 65
Corporate Governance 70 Group Structure and Shareholders 71 Capital Structure 72 Board of Directors 74 Executive Board 85 Compensation, Shareholdings, and Loans 92 Shareholders’ Rights 97 Takeovers and defense measures 99 Auditors 99 Disclosure Policy 100 Contacts 101
4 2019 Annual Report 5 Letter from the Chairman and the CEO
A very good year for BCV Serving the people of Vaud for 175 years
We had a successful year in 2019, delivering results on In 2020, we are celebrating your Bank’s 175th anniversary. several different levels. We posted very strong financials We had planned a variety of special events to mark this and grew our business volumes despite a slowing economy milestone, including prizes, discounts, and other giveaways and persistently low and even negative interest rates. We for our customers, our employees, and the general public. also defined a new strategic plan,vista , which will guide However these events have been suspended at the time of our Bank over the coming years. And we continued to writing due to the coronavirus outbreak. expand our offering with new online services and socially responsible investment solutions. Beyond these events, we see this anniversary as an opportunity to highlight BCV’s core guiding principles: close We’re pleased to report that we achieved across-the- ties with the community we serve and a commitment to board gains in our financial results. Revenues rose 3% to contributing to our home region by fostering economically, CHF 1.0bn. As in recent years, we maintained our sharp environmentally, and socially sustainable development. focus on cost discipline, and operating profit was up 4% to CHF 419m. That increase, coupled with lower tax expense As part of our vista strategic plan, we have enhanced following the implementation of Vaud Canton’s corporate our approach to corporate social responsibility (CSR). tax reform, pushed net profit up 4% to CHF 363m. For example, we signed the United Nations Principles for
Pascal Kiener Jacques de Watteville CEO Chairman of the Board of Directors
6 2019 Annual Report 7 Letter from the Chairman and the CEO
Responsible Investment (UNPRI) and have incorporated liquidity coverage ratio (LCR) of 129%, which is well above environmental, social, and governance (ESG) criteria into the regulatory minimum, now at 100%. our institutional asset management processes. You can find more details about these and other CSR initiatives we’ve Proposed CHF 1 increase in dividend to CHF 36 per share adopted in our 2019 Sustainability Report, which will be issued in the second quarter of 2020. And as of this year, We are executing on the dividend policy that we we’ll be publishing that report annually in both French and announced in 2018, taking account of the reduction in the English, and under a new format in line with the Global Vaud corporate tax rate. In light of our very strong 2019 Reporting Initiative standards. results, the Board of Directors will recommend a CHF 1 increase in the dividend to CHF 36 per share. Based on the More broadly, vista is designed to maintain the positive BCV share’s 2019 year-end closing price, that corresponds trend that our business lines have been experiencing and to a total return of 4.6%, one of the highest among listed to position the bank to respond to the challenges we will Swiss companies. face in the coming years. Our goals here include continuing to improve our service quality along the entire value chain Proposed 10-for-1 stock split to create an even better customer experience. We will also further enhance our distribution channels – branches, At the Shareholders’ Meeting, the Board will also propose digital services, and call centers – to give customers an a 10-for 1 stock split, where one BCV share before the split integrated multichannel experience. And we will continue will equal ten shares after the split. This will enhance the to capture more of the cross-selling potential inherent in liquidity of the BCV share and make it more attractive our universal bank business model. to private investors. If the proposal is approved by shareholders, BCV shares are currently expected to begin Changes to the Board of Directors trading on a split-adjusted basis on 28 May 2020.
Reto Donatsch will be stepping down from the Board of Coronavirus pandemic Directors at the Annual Shareholders’ Meeting on 30 April 2020, as he will have reached the age limit set by cantonal At the time of writing, Swiss and Vaud authorities have just legislation governing BCV. We would like to express our put in place exceptional measures to slow the spread of the deepest appreciation to him for his professionalism and new coronavirus, and the consequences of the pandemic the unfailing commitment he has brought to BCV since are still difficult to predict. Here at BCV, we have taken all joining the Board in 2011. At the Shareholders’ Meeting, necessary measures to protect our staff and customers we will recommend that Eftychia Fischer be named as his while continuing to provide the banking services our replacement. We will also recommend that shareholders Canton needs to keep running, in order to help us all make reelect Jack Clemons, whose term ends this year. The it through this crisis. Vaud Cantonal Government appointed Jean-François Schwarz to replace Mr. Donatsch as Vice Chairman of the Acknowledgements Board and reappointed Peter Ochsner for another four- year term starting on 1 July 2020. We’d like to end this letter with our most heartfelt thanks to our customers for their loyalty, and also to our staff here Recognized financial solidity at BCV for their commitment during this difficult period. Finally, we’d like to thank our shareholders for the trust BCV has one of the most diversified revenue streams of they place in us year in and year out. any Swiss cantonal bank, a CET1 ratio of 17.1%, and a leverage ratio of 6.3%. Our solid financial position is widely recognized. The two leading credit rating agencies, Standard & Poor’s and Moody’s, reaffirmed their respective AA and Aa2 ratings – just two notches below the agencies’ highest Jacques de Watteville Pascal Kiener possible rating. We also ended the year with a Basel III
6 2019 Annual Report 7
Who We Are Overview of BCV
Our legal status Our missions
BCV (Banque Cantonale Vaudoise) was founded on Pursuant to Article 4 of the LBCV, BCV’s corporate 19 December 1845 by the Vaud Cantonal Parliament mandate is to offer a comprehensive range of banking (Grand Conseil Vaudois) as a société anonyme de droit services to the local community and to contribute to the public (i.e., a corporation organized under public law). The development of all sectors of the Vaud economy and to Canton of Vaud is BCV’s majority shareholder, with 66.95% the financing of the Canton’s public-sector institutions and of the share capital. BCV is listed in the Vaud Commercial entities. Also, as part of our community focus, we provide Register and is subject to all applicable legislation. Its mortgage financing in Vaud. The LBCV also stipulates that legal status is defined in the Cantonal Act Governing BCV is to be guided by the principles of economically, the Organization of Banque Cantonale Vaudoise (LBCV) environmentally, and socially sustainable development. of 20 June 1995, as amended on 25 June 2002, 30 January More generally, our missions are to create value for our 2007, and 2 March 2010. BCV’s commitments are not shareholders and clients, to be a benchmark employer, and underwritten by the Canton. However, customer deposits to be a good corporate citizen. are covered by a nationwide system of investor protection concerning Swiss banks and securities dealers. This system Our recent history insures deposits of up to CHF 100,000 per person and per bank. In addition, a limited cantonal guarantee applies Since the Bank was founded in 1845, it has considerably to deposits with Caisse d’Epargne Cantonale Vaudoise, a expanded its business in the Canton. In the 1990s, the savings institution managed by the Bank. banking industry in Vaud underwent major consolidation. BCV acquired Banque Vaudoise de Crédit in 1993 and Our core businesses merged with Crédit Foncier Vaudois in 1995. From 1996 to 2000, we moved to diversify our operations, particularly in With revenues of CHF 1.0bn in 2019 and total assets international trade finance, offshore wealth management, of CHF 48.4bn, we rank among Switzerland’s top five and trading. Total assets more than doubled between 1990 universal banks by total assets. BCV is the country’s and 2000 as a result. In 2001 and 2002, following an in- second-largest cantonal bank and the largest bank in Vaud, depth assessment of loan-book quality, BCV Group carried with a network of 63 staffed branches and more than 220 out two recapitalizations, in 2002 and 2003. The Canton ATMs throughout the Canton. The Bank’s organizational provided most of the funds raised on both occasions. structure is based on four client-oriented divisions: Retail Banking, Private Banking, Corporate Banking, and Asset From 2003 to 2005, we successfully refocused operations Management & Trading. We offer a comprehensive range on our four core businesses while remaining active in of financial services to all client segments. BCV Group had selected niche activities offering strong potential in terms 1,921 full-time-equivalent employees at 31 December of both growth and profitability. From 2005 to 2008, we 2019. At that date, in addition to the parent company, implemented the second phase of that strategy to take BCV Group comprised the private bank Piguet Galland full advantage of our unrivaled presence in our local & Cie SA and two fund management firms, Gérifonds market, the Canton of Vaud. That project included the SA and GEP SA (société pour la gestion de placements reorganization of our local distribution structure into nine collectifs). The full scope of consolidation at 31 December regions in order to strengthen ties with customers. 2019 is described on page 133.
10 2019 Annual Report 11 Who We Are – Overview of BCV
In 2007, the Bank repurchased the final tranche of the For the business lines, we are targeting: participation-certificate capital created in the 2003 recapitalization. On 15 April 2008, the Vaud Cantonal • Above-market growth in asset management, SMEs, and Parliament voted to authorize the Cantonal Government onshore private banking; to reduce the Canton’s stake in our share capital from 66.95% to 50.12%. The Cantonal Government’s decision • At least market growth in retail banking; not to sell any shares, first announced on 25 November 2008 and reaffirmed on 16 July 2010, remains unchanged. • A focus on the profitability of our commodities trade finance and large corporates businesses; Starting in 2008, we implemented a series of strategic plans based on our business model as a universal bank • Continued development of our other business lines. with solid local roots. These strategic phases have driven the Bank forward following the 2002‒2007 phase where We have identified several strategic focus areas that will we refocused our activities on the Canton of Vaud, enable us to meet future challenges. These goals include: and have paved the way for new strategic focus areas – leveraging our high-quality service to set ourselves apart • Continuing to improve our service quality along the from the competition, further expanding our multichannel entire value chain to create an even better customer products and services to meet our customers’ needs experience; across all channels (branches, call centers, and online), and continuing to enhance our digital offering. • Enhancing our distribution channels (branches, digital services, and call centers) to give customers an integrated As part of the growth strategy for our onshore wealth multichannel experience; management business, BCV Group acquired Banque Franck Galland & Cie SA in 2011. This bank was merged • Capturing more of the cross-selling potential inherent in with Banque Piguet & Cie SA, a BCV subsidiary since 1991, our universal bank business model; creating Piguet Galland & Cie SA, a major wealth manager in French-speaking Switzerland. • Implementing operational improvements through targeted measures; In 2019, the Board of Directors and Executive Board conducted a new in-depth review of the Bank’s strategy, in • Increasing our attractiveness as an employer and fostering light of the numerous challenges facing the banking sector continuous skills development among our employees; and the overall economy. The review confirmed that the strategy would continue on the same course and identified • Sharpening our focus on corporate social responsibility additional targeted improvements. (CSR) measures, including a wider range of sustainable banking products, socially responsible investment Our strategy options, and mortgage solutions.
In 2019, we defined a new strategic phase ‒vista ‒ that We reviewed our strategic framework and maintained or builds on those we have been implementing for more than slightly adjusted our key financial targets. In the prevailing ten years. This next phase aims to maintain the positive low-interest-rate environment, the Group aims to achieve trend that the Bank’s business lines have been experiencing sustainable growth, with revenues and operating profit over the past few years. It is also designed to position the trending along the same lines as in recent years. We are Bank to respond to the main challenges we will face in the targeting a cost/income ratio of 57%–59% and a CET1 ratio coming years, such as heightened competition, persistently of at least 13%; our ROE target based on this minimum low interest rates, advancements in digital technology, and target CET1 ratio is now 13.5%–14.5%.These targets should ever-changing customer needs. be viewed from a long-term perspective.
10 2019 Annual Report 11 Who We Are – Overview of BCV
In line with the approach adopted over the last decade, Responsibility BCV decided in early 2018 to extend its dividend policy for another five years beginning with the 2018 reporting BCV employees demonstrate responsible professional period. Following the reduction in our tax expense due behavior. This includes taking responsibility for their actions, to the implementation of Vaud Canton’s corporate tax being conscientious in their work, and being loyal to the reform, the Bank intends to pay an ordinary dividend of company. CHF 34–38 per share, barring significant changes in the economic or regulatory environment or in the Bank’s Given the importance that we ascribe to our core values, situation. we have put in place a long-term employee information and training program. Our values are also an integral part of Our values employee performance reviews.
We have defined four values that are central to our strategy and culture: responsibility, performance, professionalism, and close ties with our customers and the broader community. We believe that a key to long-term success is ensuring that all our employees share a common culture built around core values. The values described below underpin all our actions – as well as our interactions with customers and colleagues.
Close ties
As a Swiss cantonal bank, BCV maintains a deep connection with the local community that goes back a century and a half. Our employees use their on-the- ground presence in Vaud Canton and knowledge of the local community to fully appreciate and understand the needs and expectations of BCV’s customers.
Professionalism
Every employee is committed to delivering the best possible service to customers. To achieve this, our people draw on the best practices in their respective fields of expertise and constantly seek to expand their skills and knowledge.
Performance
At BCV, we set ourselves ambitious goals across the board. Our people are results-oriented. They systematically seek pragmatic and effective solutions to the challenges that arise every day.
12 2019 Annual Report 13 12 2019 Annual Report 13 Who We Are The BCV Share
Following the sharp end-2018 correction in almost every return for our shareholders. BCV’s share price has climbed stock market around the world, some market observers significantly over the past ten years and become one of the had a grim outlook for 2019. That pessimism seemed even highest-priced stocks in the Swiss banking industry. The more justified when the global economy slowed in 2019 Board of Directors will thus propose a 10-for-1 stock split amid trade tensions between the US and China. But in at the 2020 Annual Shareholder’s Meeting. That proposal is fact, indices rose across the board: In Europe, both the SMI mainly intended to enhance the liquidity of the share and and the CAC40 climbed 26%, the DAX was up 25%, and make it more attractive to private investors. the Europe Stoxx 600 added 23%. In the US, the Dow Jones rose by 22%, the Nasdaq by 38%, and the S&P 500 by 29%. With over one million shares traded in 2019 – for an Elsewhere in the world, the Shanghai Stock Exchange gained average CHF 3.4 million changing hands daily – the BCV 22% over the year, while the MSCI Emerging Markets index share was already one of the six most-liquid banking stocks was up 15%. All the world’s main indices posted double-digit on the SIX Swiss Exchange. gains, pointing to a clear decorrelation between economic fundamentals and share price movements. The two main rating agencies, Standard & Poor’s and Moody’s, reaffirmed their respective AA and Aa2 ratings The BCV share rose once again, closing at CHF 790 at end- for BCV, both with a stable outlook. The agencies pointed 2019 (vs. CHF 741 at end-2018). That share-price appreciation, in particular to the Bank’s diversified revenue streams coupled with the CHF 35-per-share dividend paid out to compared with other cantonal banks and strong capital base shareholders in May, brought the total return to 11.3% – the relative to its risk profile. BCV remains one of the best-rated 8th consecutive year the share has generated a positive total banks in the world without a formal government guarantee.
Total shareholder return1 20% 15% 10% 5% +5.3% 0% -5% -8.6% -10% -15% -20% -25% -28.8% -30% -35% 01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018 11/2018 12/2018 BCV Swiss Performance Index (SPI) SWX SP Banks Index
1) Stock-market performance over the period plus dividends and capital distributions
14 2019 Annual Report 15 Who We Are – The BCV Share
Listed on: SIX Swiss Exchange Standard & Poor’s Par value: CHF 10 Long-term credit rating: AA / stable Swiss security number: 1 525 171 Short-term credit rating: A-1+ ISIN code: CH0015251710 Moody’s Ticker symbols: Bloomberg: BCVN Long-term credit rating: Aa2 / stable Telekurs: BCVN Short-term credit rating Prime-1 Reuters: BCVN.S
2015 2016 2017 2018 2019 Number of shares outstanding (in thousands) 8 606 8 606 8 606 8 606 8 606 Period-end share price (in CHF) 636.50 645.00 735.00 741.00 790.00 Share price high / low (unadjusted, in CHF) – high 640.00 694.00 764.50 823.00 820.00 – low 510.50 582.00 644.00 688.00 708.00 EPS1 (in CHF) 39.1 36.0 37.2 40.6 42.2 Adjusted EPS2 (in CHF) 39.1 35.6 37.2 40.6 42.2 Dividend per share (in CHF) 23.0 23.0 23.0 35.0 36.0 3) Dividend yield4 (in %) 3.6 3.6 3.1 4.7 4.6 Total payout 5 (in CHF) 33.0 33.0 33.0 35.0 36.0 3) Total payout yield4 (in %) 5.2 5.1 4.5 4.7 4.6
1) Reported net profit after minority interests over total number of shares in issue 2) Reported net profit after minority interests, excluding an allocation to the reserves for general banking risks, over total number of shares in issue 3) Dividend to be proposed at the 2020 Shareholders’ Meeting 4) Relative to the period-end share price 5) Total amount distributed to shareholders in the form of an ordinary dividend together with a distribution drawn from paid-in reserves
Share ownership structure Share ownership by geographical zone
Registered shares owned Registered shares owned by the Canton of Vaud 67% by non-Vaud Swiss shareholders 11% Registered shares owned Registered shares owned by private shareholders 9% by foreign shareholders 1%
Registered shares owned by Unregistered shares 14% institutional shareholders 9% Registered shares owned Registered shares owned by Vaud shareholders 74% by BCV employees 1%
Unregistered shares 14%
14 2019 Annual Report 15
Who We Are Our Missions
Under the Cantonal Act Governing the Organization of 1. Contributing to the economic development Banque Cantonale Vaudoise (LBCV), BCV’s objective as a of the Canton of Vaud full-service bank with a community focus is to contribute to the development of all sectors of the economy of our We are the leading bank in Vaud. The surveys and studies home region, the Canton of Vaud, and to the financing we regularly conduct to assess our market position, of public-sector entities as well as to help meet demand along with the fact that half of the Canton’s people and for mortgage lending in the Canton. Furthermore, these companies bank with us, show that we are an integral missions apply across the Canton and entail a particular part of life in Vaud. Thanks to our concerted and ongoing focus on the principles of economically, environmentally, efforts to improve service quality, and despite increasingly and socially sustainable development. Our role as a fierce competition, BCV is perceived as solid, reliable, and cantonal bank is to produce positive impacts for all competent. Indeed, since the 2008–2009 financial crisis, we our stakeholders – our customers, shareholders, and have witnessed a significant influx of new funds as a result the people of Vaud. As a modern company mindful of of expanded business with existing clients and the arrival of our duties and obligations, we have defined a series of many new clients. objectives in the area of corporate social responsibility: Our strong market position in the Canton is the result of 1. Contributing to the development of all sectors of several factors: our extensive on-the-ground presence, our the economy of our home region, the Canton of understanding of the needs of both individual and business Vaud, and to the financing of public-sector entities, customers, our know-how, our professionalism, and our as well as to help meet demand for mortgage responsible approach to banking. As the leading bank in lending in the Canton. Vaud Canton and in accordance with Article 4 of the LBCV, we are committed to contributing to the development of 2. Meeting our clients’ needs with high-quality all sectors of the economy across our home region and to financial products and services. the financing of public-sector entities, as well as to help meet demand for mortgage lending in the Canton. 3. Paying particular attention to the principles of economically, environmentally, and socially sustainable development. Business loans by sector 4. Creating lasting value for shareholders. Real estate and construction 43%
5. Being a benchmark employer. Other 13% Hotels and restaurants 2% 6. Playing an active role in the community. Farming and wine-making 3% Financial 6%
Manufacturing 6% Retail 12% Government administration, healthcare and welfare 14%
Source: BCV
18 2019 Annual Report 19 Who We Are – our Missions
80% of our lending is local given first-hand exposure to the entrepreneurial mindset that is so pervasive in Silicon Valley. Our loan book covers all areas of the Canton, with the people and businesses of Vaud accounting for 80% of These activities are part of an initiative launched several total lending volumes. years ago. In 2011, we published guides to setting up a business, in collaboration with the CVCI. We also regularly At end-2019, 51% of our outstanding customer loans were conduct a series of seminars for new business owners of to individuals and 49% to companies across all sectors of all ages, in collaboration with the CVCI, SAWI (a marketing the economy as well as public-sector entities. and communications organization), and GENILEM (a startup support organization). We work with companies through every stage of their development: from startup and growth to maturity and Working with clients in difficulty succession. Our partnerships with growing and mature businesses are well known, but our role in business In line with our mission, we aim to continue our creation and succession is less so. In 2019, we provided relationship for as long as possible with businesses and around CHF 50m in financing to get 92 startups off the individuals that, for one reason or another, run into ground in Vaud Canton. temporary difficulties. Specialized staff work with these clients in order to find solutions that will help them restore their financial stability.
Naturally, continuing the business relationship is only possible if the company or individual can be reasonably 92 expected to return to a sustainably sound financial new position without any distortion of competition. Our businesses procedures in this respect follow clearly defined rules that financed meet the highest ethical standards. We have shown that we can manage difficult cases effectively by looking for constructive solutions and working proactively on a case- In addition, BCV is part of Innovaud, the Vaud Cantonal by-case basis. Government’s platform for promoting innovation in Vaud Canton. As part of the Innovaud project, we have 2. Meeting our clients’ needs committed CHF 500,000 in financing per year for 10 years to the Foundation for Technological Innovation (FIT). Close ties with our customers
To help encourage budding entrepreneurs in Vaud, for the Our local presence is of key strategic importance. We are seventh year in a row BCV organized the Silicon Valley Startup the Canton’s top employer in banking and the most widely Camp in association with the University of Lausanne (UNIL), accessible bank in Vaud thanks to our dense retail network, the École polytechnique fédérale de Lausanne (EPFL), the which includes nine regional centers of expertise and 63 Canton’s universities of applied sciences, the Vaud Chamber branch offices across the Canton (see our retail map and of Commerce and Industry (CVCI) and the FIT. Ten students list of branch addresses on pages 196–199). from these local colleges and universities were given the chance to spend a week soaking up the atmosphere of We believe that our branch footprint effectively aligns with Silicon Valley. They followed a packed schedule of university the needs of the dynamic and diversified community and visits, meetings, and workshops, all organized by Swissnex, a economy that we serve. And we continue to enhance our Swiss organization based in San Francisco whose mandate is network each year to meet those needs. Between 2006 and to strengthen ties between Switzerland and North America 2013, most of our branch offices were partially or totally in the areas of science, education, art, and innovation. The renovated, with the aim of making them more comfortable students learned the basics of starting a business and were and user-friendly for our customers. This program came to
18 2019 Annual Report 19 Who We Are – our Missions
an end with the refurbishment of our head office at Place A broad digital proposition Saint-François in Lausanne. Since then, we have carried out several smaller-scale projects. For example, our Avenches Our clients are increasingly taking advantage of the 24/7 and Bussigny branches moved into new premises in 2019. access provided by our online banking services through our website, bcv.ch, and our online banking platform Being close to our customers also means being increasingly accessible via BCV-net on a computer or BCV Mobile on a accessible and in step with changing lifestyles. This is smartphone or tablet. reflected in the convenient opening hours of our branches, with appointments for financial advice available Monday We regularly add new features to our digital-banking through Friday from 8am to 7pm and on Saturday mornings proposition. in some of our shopping center branches. Customers may also speak with an advisor remotely. Our Customer For example, couples and families interested in a joint Service Center is available every weekday from 7:30am to account as well as young people aged 14 and over can now 7:30pm, and customers can contact our center’s advisors open an account directly on our website. We also revamped through traditional channels – such as telephone, email, our website’s online help and contact pages to make it easier and the post – or through our instant messaging service. for customers to find the an-swers to their questions. Our advisors provide answers to customers’ questions on topics spanning day-to-day banking, investments, and Over 60% of our customers bank online and more than loans in videoconference sessions. They can also provide eight out of every ten payments are made on BCV-net. that information via call-back for individuals who make a Our customers are increasingly using their smartphones request on bcv.ch. In 2019, our Customer Service Center to access our online banking services. Three-quarters of handled 620,000 customer contacts. Our business banking e-banking log-ins are via our BCV Mobile app, and one- hotline for Vaud companies is available to answer day-to- third of users now do their online banking exclusively on day banking questions between 8am and 6pm, Monday to their smartphones. Friday. This service handled around 90,000 inquiries in 2019. In addition to the more standard functions, like viewing We also offer automated services through our network of balances and transaction details and making payments, over 220 ATMs in more than 120 locations across Vaud. For we have equipped both BCV-net and BCV Mobile with greater ease of use, our ATMs feature touchscreens, and numerous new features. In BCV-net, for example, corporate an interface for the visually impaired, and run on the new clients can view all their payables and receivables on a single, ATMfutura software for Swiss bank ATMs. In 2019, around redesigned page, as well as manage their employees’ BCV- 9 million transactions were carried out via our ATMs. net access rights. For our wealth management clients, we
Comparison of mortgage loans, other loans, and workforce distribution, by region
Nord Gros- Broye Lavaux Vaudois Nyon Morges Riviera Chablais de-Vaud Lausanne Mortgages 4% 11% 15% 17% 13% 11% 8% 8% 15%
Other loans 4% 7% 16% 15% 10% 11% 10% 11% 17%
Workforce distribution 3% 5% 11% 10% 9% 9% 5% 6% 43%
Sources: BCV; Statistique Vaud Mortgages: real-estate lending including fixed-term loans secured by a mortgage Workforce distribution: Structural Business Statistics, 2017
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rolled out our BCV Conseil range of investment advisory Next Property, a company owned by businesses in the services, which include an easily accessible portfolio real-estate sector, took a 50% stake in real-estate listings overview and personalized recommendations. website newhome.ch, which is run by BCV and 17 other cantonal banks. This new ownership structure will make In addition, all BCV Mobile users can now view and it possible to expand the website, add more innovative manage e-statements, modify scheduled payments, make features, and enhance the user experience. account-to-account transfers 24/7, view and manage debit and credit cards, share bank account information, and These various physical and digital distribution channels check estimated wait times at our branches and for calls to allow us to offer rapid, practical, and efficient services that our Customer Service Center. These many improvements can be accessed anywhere and at any time depending on reflect our pledge to follow through on the customer our customers’ needs. feedback we receive from focus groups, through the comments left in app stores, or via any other channels. A full range of high-quality banking services As a result, BCV Mobile is now one of the highest rated banking apps in Switzerland. We constantly strive to satisfy the changing needs of our customers – individuals, businesses, pension funds, and public-sector entities. Through our various digital and Over physical channels, we provide products and services that cover the full range of banking requirements, with a special focus on service quality and how we can continuously 60% improve it. Those efforts have been recognized by the of our customers people of Vaud. BCV was named the most recommended use our digital bank in the Canton, according to surveys conducted by banking services LINK Institut in 2018 and 2019 on a representative sample of Vaud residents. BCV TWINT mobile payment
The BCV TWINT app launched in 2017 is likewise growing in popularity. In early 2020, TWINT surpassed Most the two-million-user mark nationwide. This payment recommended app developed by the Swiss banking sector allows users bank in Vaud to pay for in-store and online purchases, transfer money 2018 to other TWINT users, buy public transportation tickets, 2019 Source: LINK Institut, 2019, recommendation to a friend and pay for parking. Additional new features are already in Survey of 1,646 Vaud residents, representative of the population the pipeline for 2020. And, with the new European Mobile Payment Systems Association (EMPSA), of which TWINT We are materially improving our customer experience. is a member, TWINT users may one day be able to use the For example, when customers open an account, they now app abroad. receive a text message notifying them when the account is activated. We have also reduced the time it takes to carry BCV’s TradeDirect platform remains one of the most out our new-customer verification processes, in over 90% competitively priced online brokerage services in Switzerland. of cases, to 48 hours. Plus, customers can choose to receive The tradedirect.ch website provides access to 25 stock a notification once they have reached an account or card exchanges and over 100,000 investment vehicles, and has limit. That could be, for example, when they have made powerful market-tracking, search, and analytical tools. An the maximum number of withdrawals from an e-Savings app for smartphones is also available. With this app, users account – that way, there are no unpleasant surprises can enter orders, manage their portfolios, track individual when they receive their monthly statement. We further stocks, stay up to date with the latest market news, and view encouraged customers to give us feedback after visiting ratings and analyses provided by research firm TheScreener. one of our branches, carrying out certain transactions, or,
20 2019 Annual Report 21 Who We Are – our Missions
more generally, on BCV’s service quality as a whole. We from the comfort of their home or on the go. In addition, continued to leverage this valuable feedback to improve every year we hold four roundtable discussions called our service quality. “Les Rendez-vous de la Finance” that attract hundreds of private investors looking for insights into key business and As for our specific banking solutions, we offer a market trends. comprehensive range of products and services to Retail Banking customers. That range includes a set of “banking In Corporate Banking, BCV offers a comprehensive range pack” bundles, which can be opened online or at a BCV of products and services, including financing, treasury branch. Customers of all ages, whether working or in management, hedging, occupational pension solutions, school, can simply choose the pack that best fits their daily and advisory services at all stages of the company’s life, banking needs. Personal banking customers can also take from startup to succession. That means we can meet the out a mortgage loan to meet their home financing needs needs of a very diverse clientele, from artisans serving the and use our asset allocation funds or third-pillar individual local market to multinationals conducting business the retirement accounts to invest their savings for the long world over. Since 2016, over 2,000 newly created firms have term. In 2019, we introduced an investment-fund savings taken advantage of our offer of a year’s worth of no-fee plan that lets retail customers automatically invest a given services, designed to help them get off the ground. And, in amount – however small – every month at lower fees in 2019, BCV provided tens of millions of francs in financing order to build up their assets over time. for 63 business successions, thereby helping ensure that hundreds of jobs remain in the Canton.
Our business succession experts are backed by in-house specialists in financing, asset management and pensions, as well as our network of outside experts.
1 out of every 3 mortgage loans in Vaud are provided by BCV 1 out of All individual customers, regardless of their wealth, can every 2 SMEs receive comprehensive financial planning advice and in Vaud Canton bank with BCV wealth management services. In Wealth Management, we offer a full range of banking and investment solutions In Asset Management & Trading, investors can take and advisory services. Our regional footprint means we advantage of BCV’s proven expertise through our have advisors throughout the Canton; clients appreciate comprehensive range of advisory and other services knowing that our specialists are close by when they want together with investment products, from investment funds to sit down and talk over their financial situation or the and structured products to management mandates and larger economic picture. In 2019, we continued to grow our asset allocation funds in both specific and global investment range of advisory services. To round out our BCV Conseil universes. To meet our clients’ needs in institutional asset offering, we launched BCV Conseil Classique, BCV Conseil management – an area in which BCV is a leading player – Premium, and BCV Active Advisory. These new services, in we focused on socially responsible investment solutions addition to the BCV Conseil Plus service we rolled out in that comply with environmental, social, and governance 2018, enable us to meet all our clients’ investment advisory (ESG) criteria. Our Bank is playing an active role in this field. needs, from occasional advice to frequent support for For example, to fully adopt our ESG-centric approach, we investors who require BCV’s full range of expertise. With adjusted the investment universe for our stock portfolios, BCV Conseil, clients have a dedicated advisor and can without negatively impacting their expected risks or track their portfolio performance on a digital platform ‒ returns – two key factors in how we manage our portfolios.
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These efforts paid off and were positively viewed by our issues. For over the past ten years, we have shared the institutional clients. Clients also sought advice about financial details of our sustainable development performance as markets; 2019 was a year marked by economic uncertainty, well as the impacts of our Bank’s activities across Vaud in stock-market rallies, and interest rates that continued to our Sustainability Report. Until now, the report has been decrease, remaining low or negative in Switzerland and the published in French every two years. rest of Europe. Against this backdrop, BCV’s funds and other investment products generated good returns relative to As part of the new strategic plan we defined in 2019, their benchmark indices and peers. called vista (see the Overview of BCV and BCV in 2019 sections), we have enhanced our approach Clients also sought advice about financial markets; 2019 to sustainability. We have created dedicated CSR was a year marked by economic uncertainty, stock-market organizational and governance structures and, as of the rallies, and interest rates that continued to decrease, 2019 report, are publishing our Sustainability Report remaining low or negative in Switzerland and the rest of annually in both French and English, with added content Europe. Against this backdrop, BCV’s funds and other in line with the Global Reporting Initiative standards. The investment products generated good returns relative to first edition of the report in its new format will be issued their benchmark indices and peers. in the second quarter of 2020. As with our previous reports (in French only), it can be downloaded from the BCV website at https://www.bcv.ch/en/About-us/ Corporate-Social-Responsibility.
Reinforcing our CSR approach entails both strengthening what we already offer and developing new solutions. For example, we have made it possible for institutional and private clients to build an ESG-centric portfolio based on Socially Responsible Investing (SRI) principles. The overall ESG profiles of their portfolios are improved by reweighting the equity allocations, based on each stock’s ESG rating. 7 out of every 10 pension funds To do this, we draw on analyses that have been conducted in Vaud count on BCV by MSCI Research using a tried-and-tested methodology. We have also drawn up guidelines on how to vote at the Given the current and upcoming regulatory changes AGMs of Swiss companies whose stocks are held by our affecting financial products, we are adapting our service investment funds. Companies involved in illegal activities model and product range accordingly. Our aim is to ensure or with controversial practices are excluded. And to that all individual and corporate customers are well- reduce our environmental footprint, we have screened informed, protected, and provided with high-quality service out companies that generate a significant proportion of across all our physical and digital distribution channels. their income from coal. Lastly, BCV became a signatory to the United Nations Principles for Responsible Investment 3. Acting on the principles of sustainable development (UNPRI). More information on SRI and ESG at BCV can be found on our website at www.bcv.ch. The principles of economically, environmentally, and socially sustainable development are innately linked to BCV’s mission and our success in the Vaud market. We see this link as a chance to create a virtuous circle that allows us to be both competitive and socially responsible. That is how we can maximize the benefits we bring to all our stakeholders – by creating value for our customers, shareholders, and the people of Vaud all while doing our part to address economic, social, and environmental
22 2019 Annual Report 23 Who We Are – our Missions
Among the three dimensions of sustainable 4. Creating lasting value for shareholders development, economic development is, of course, fundamental for a bank. The previous sections of At BCV, we are committed to creating lasting value for this chapter have illustrated some of the ways we our shareholders. In keeping with this mission, our strategy contribute to the local economy and serve individuals targets sustainable growth and a low risk profile. We have and businesses in Vaud. To continue achieving our therefore adopted a dividend policy aimed at generating objective of contributing to the economic development attractive returns for all our shareholders over the long term. of our Canton, we must ensure that our foundations are solid and that our vision for BCV leads to steady We paid out a total of CHF 3.5bn to our shareholders profitability going forward. In keeping with this mission, for the 2007 to 2019 financial years. We distributed 12 our strategy targets sustainable growth and a low risk ordinary dividends: the first three of CHF 14, CHF 20, profile. This approach benefits all our stakeholders. and CHF 21 per share; then five of CHF 22 per share and In 2019, for example, we paid out CHF 262m to our three of CHF 23 per share; and the last of CHF 35 per majority shareholder (the Canton of Vaud) and to Vaud share. We also made 11 special distributions, which were municipalities. This amount comprised a dividend and tax-free for shareholders. The first distribution was CHF cantonal and municipal taxes. 32.50 per share and the following 10 were each CHF 10 per share. The first three payments were in the form of The principles of sustainable development underpin the par-value reimbursements, while the following eight were actions we take to enable employees to reach their full distributions out of paid-in reserves. potential and are reflected in our involvement in the local community. Yet another example of this approach Our financial strength, solid market position and status concerns the environment. We continued our efforts as a cantonal bank have won recognition from the rating to reduce our energy consumption and environmental agencies. Standard & Poor’s maintained our AA rating footprint in 2019. For several years now, we have been for the eighth year running, and Moody’s reaffirmed our commissioning an environmental assessment in order long-term rating of Aa2 for the fifth year in a row. Both to quantify our impact and suggest targeted mitigation agencies’ ratings are accompanied by a stable outlook. measures. While we regularly take steps to reduce our Our ratings attest to the Bank’s ongoing efforts in recent consumption of paper and other supplies and to make years, in terms of both strategy and operations. All of our IT system more energy efficient, most of the potential the rating agencies’ credit opinions can be found in the savings are to be found in our infrastructure, an area we Investor Relations section of our website, bcv.ch, or via the have been investing in for a number of years. We cut our free BCV Investor Relations iPad app. electrical energy consumption by 15% in just five years by installing new electrical equipment. 5. Being a benchmark employer
In recent years, we have invested several million francs BCV is one of Vaud’s leading employers and the largest into our Aigle and Nyon regional decision-making centers employer in the Canton’s banking sector. We consider so that the buildings meet “Minergie” energy-efficiency our dynamic human resources policy to be crucial to certification criteria and to reduce energy consumption both our mission and our strategy. Alongside missions in both buildings by at least 60%. And as mentioned and objectives, skills development is a key employee above, when it comes to our investment funds, we have performance factor. We encourage training as a driver of screened out companies that generate a significant staff motivation and knowledge management. Moreover, proportion of their income from coal. we are dedicated to creating workplace equality, promoting diversity, and offering the same opportunities In 2019, BCV earned a B grade from the Carbon Disclosure to all staff. Project (CDP) survey; B is the third-highest of eight grades ranging from A to D-. The Bank has been taking part in A common corporate culture is an integral part of our the CDP, which measures the greenhouse gas emissions human resources policy. At the heart of this culture of companies, every other year since 2010. are BCV’s four core values: responsibility, performance,
24 2019 Annual Report 25 Who We Are – our Missions
professionalism, and close ties with our customers and Focus on training the broader community. These values are also central to the ethical principles and code of conduct in force within In 2019 BCV provided job training for 98 entry-level BCV Group. This code, which is available on our website, employees, including 37 trainees, 32 high-school graduates, was reviewed and expanded in 2013. 18 university interns and 11 participants in the “Rejoignez- nous” training program. Staff BCV is one of the Canton’s main providers of professional At the end of 2019, BCV Group had 1,921 employees on training. We have our own training center with around a full-time-equivalent (FTE) basis, up slightly from the 260 instructors, more than three quarters of whom work prior year. The parent company accounts for the largest elsewhere within the Bank. share of the workforce, with a total of 1,915 employees, or 1,728 FTEs. In 2019 we filled 283 positions: there were 165 outside hires, and 87 internal transfers, and 31 people were kept on after they completed BCV internships or training programs. Average staff turnover was 8.5% in 2019. 32 37 High-school Trainees In terms of gender equality, the parent company had 805 graduates female employees (42% of the workforce) at the end of 18 2019. Women accounted for 28% of employees with signing University interns authority (277 positions) and 10% of all senior managers (32 positions). In addition, women run 38% of our branches (16 positions), where they play a key role in running our retail In 2019, the training center focused on skills development network. There were 516 employees (27% of the Bank’s for all of the Bank’s employees. Client advisors in particular staff) working part time at the end of the year. require regular training to be able to keep pace with constant changes in client needs and the regulatory environment. To that end, we adopted a certification system used by several other banks that is in line with the ISO 17024 standard and recognized by the Swiss Association for Quality (SAQ). Over 180 client advisors had received their certification by end-2019.
The participants in the seventh edition of BCV’s Micro Personal banking advisors Staff MBA program, offered in collaboration with the Entrepreneurial Leadership program at the University of Geneva’s School of Economics and Management, began BCV regularly commissions a third-party polling service the 2019–2020 program in March. The 24 participants, six to conduct an anonymous survey of all staff members of whom are women, will develop interdisciplinary and in order to obtain their opinions on working conditions, project management skills. In addition, 14 BCV employees workplace relations, satisfaction with supervisors and, received post-secondary degrees from outside institutions more generally, to determine employee buy-in and in 2019, with BCV’s support. Through these actions, we commitment. 84% of employees took part in the 2018 are laying the groundwork to fill future leadership roles survey. The findings showed that employee buy-in within the Bank. remains high. Once again this year, the results were considered very good in comparison with those at other Employee benefits companies in almost all areas studied, but especially in terms of support for the Bank’s strategy and confidence BCV Group provides its employees with comprehensive in senior management. pension cover well in excess of the minimum legal
24 2019 Annual Report 25 Who We Are – our Missions
requirements. The staff pension fund is run as a defined- with cancer and to their families), Fondation Proxy (an contribution plan for purposes of retirement benefits, organization that supports caregivers), and the Fondation and as a defined-benefit plan for purposes of death and Compétences Bénévoles (an organization that provides disability benefits. support services to charities).
At the end of 2019, pension fund members comprised The future of Vaud is taking shape in its schools. Last 2,051 employees, 1,848 of whom were working at the year we presented prizes at schools across the Canton parent company, and another 1,309 pension recipients, (including primary schools, secondary schools, and including 1,025 retirees. universities) and provided support for Lausanne’s Centre Sports-Etudes for school-age athletes. BCV takes several kinds of action in the interest of employees’ health. Our focus is on prevention, for instance Sports activities are also a key part of the social fabric of by providing flu shots and financing a sports association. Vaud and are central to our sponsorship policy. Last year we sponsored a number of sports clubs and events, including: 6. Playing an active role in the community Lausanne 20K, FC Lausanne-Sport, the Fondation Foot Avenir, the Association Cantonale Vaudoise de Football, Our local community is important to us, and we take the Lausanne Hockey Club, the International Hot Air our responsibilities as a corporate citizen in Vaud Canton Balloon Festival in Château-d’Oex, the Fondation d’Aide seriously. In addition to the purely economic aspects of aux Sportifs Vaudois, the Muveran cross-country ski race, our mission, we provide support for cultural and sporting the Mérite Sportif Vaudois, the Vevey Lavaux Up car-free activities as well as outreach initiatives. event, and the Leysin Tobogganing Park.
Cultural activities are a fundamental part of life in Vaud and We also support various other important initiatives in the a key component of our sponsorship policy. Last year we Canton, including the Forum de l’Economie Vaudoise, supported the following cultural events and organizations: the Forum des 100, the Forum de l’Economie du Nord the Paléo Music Festival, Rock Oz’Arènes, the Cully Jazz Vaudois, the Ouest Forum, the Mérites de l’Economie Festival, the Fête des Vignerons, the Red Pigs Festival in awards, the Forum Economique de la Côte, the Christmas Payerne, the Paillote Festival in Morges, the Festival Off market in Vevey, and the Numerik Games Festival in at the Montreux-Vevey Septembre Musical, the Théâtre Yverdon-les-Bains. du Jorat, the Théâtre de Beausobre, the Théâtre Benno Besson in Yverdon-les-Bains, the Vevey Festival of Images, Lausanne-Pully Museum Night, the Maison d’Ailleurs science-fiction museum, the Fondation Vaudoise pour la Culture, the Fondation du Conservatoire de Lausanne, 650 associations and the Fondation de soutien à la plateforme Pôle muséal and events sponsored (i.e., the Musée cantonal des Beaux-Arts, or MCBA, in Lausanne).
We also support a number of outreach initiatives, which help bring together the local community. In 2019, these included: Société Vaudoise d’Utilité Publique (an For over 10 years we have had links with programs association of social-service institutions), La Paternelle (a that allow staff members to take part in humanitarian not-for-profit mutual insurance company for orphans), and environmental initiatives in association with non- the Vaud Red Cross, Ma Vie Ton Sang, the Association governmental organizations. In 2019, we supported the Cantonale Vaudoise des Samaritains (a first-aid training following programs: Don du Sang, a blood-donation organization), La Main Tendue Vaud helpline, Association program; the sale of oranges by the NGO Terre des Romande des Familles d’Enfants atteints d’un Cancer Hommes; and the Red Cross flower-selling initiative (a charity that provides support services to children Mimosa du Bonheur. Another initiative close to our heart
26 2019 Annual Report 27 Who We Are – our Missions
is BCV Solidarity. In 2012, we decided to replace the end- of-year gift to employees with an annual donation in our employees’ name to a humanitarian project somewhere in the world. Every year, a different project is chosen by a working group selected from a pool of volunteers. In 2019, BCV Solidarity supported The Butterfly Help Project in an initiative to rebuild a school in a poor region of Nepal. Thanks to that support, children will be able to attend a school in a building that is equipped with the basic ne- cessities such as insulation and lighting and is designed to meet earthquake resistance standards.
In addition, BCV supports its employees’ involvement in the community, thereby contributing to their personal development. In 2019, over 200 staff members were actively involved in a variety of societies, associations, and other organizations of a social, political, cultural, or sporting nature. However, BCV has a policy to not provide any type of formal support to any political party or organization.
26 2019 Annual Report 27
Year in Review Economic Environment
The global economy continued to decelerate in 2019 as economies were affected by trade tensions between the a result of trade tensions between the US and a number US and China, while the European economy weakened of countries, most notably China, along with economic and the US economy was sluggish. This resulted in global slowdowns in the US, the eurozone, and China. GDP growth declining from 3.6% in 2018 to 2.9% in 2019. In growth weakened from 3.6% in 2018 to 2.9% in 2019, its response, both the US Federal Reserve and the European lowest level since the 2009 global recession. Central Bank (ECB) loosened their monetary policies. Bond yields fell, reaching their year lows in the summer on fears Switzerland and Vaud Canton were no exception to of a recession that failed to materialize. Equity markets were the trend, especially since exporters were also hit by largely unrattled and posted solid gains. a rise in the Swiss franc against the euro. However, both Switzerland as a whole and Vaud continued to In the US, growth slowed from 2.9% in 2018 to 2.3% in experience solid domestic demand. Switzerland’s GDP 2019, due in particular to a decline in manufacturing growth eased from 2.3% in 2018 to 1.3% in 2019, while activity. Although the world’s largest economy is running Vaud’s growth went from 2.9% to 1.5%. at full employment after several years of rapid economic expansion, the Fed stopped tightening monetary policy Weakening global growth and cut rates three times in 2019. In the eurozone, aggregate growth continued to slow, from 1.9% to 1.2% Despite central-bank monetary stimulus, the global – half of what it was in 2017 – pulled down by the region’s economy has never fully recovered from the financial leading economies. In the UK, Brexit-related uncertainty crisis, and growth in 2019 was its weakest since the meant that the economic climate remained gloomy, with 2009 recession. Following on from the deterioration in growth stagnating at 1.3%. the economic climate and outlook in 2018, emerging
GDP growth around the world Exchange rates as % versus CHF 8 1.4 7 1.2 6 5 1.0 4 0.8 3 0.6 2 0.4 1 0 0.2 -1 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 01/2018 04/2018 07/201810/2018 12/2018 Switzerland Swiss GDP figures have been adjusted EUR Source: omson Reuters Datastream for the impact of major international European Union sporting events USD Emerging markets Source: IMF, World Economic Outlook USA Update, January 2020, SECO
30 2019 Annual Report 31 Year in Review – Economic Environment
Emerging-market economies also grew at a slower pace – and 2018, the US Federal Reserve cut the fed funds target 3.7% in 2019 versus 4.5% in 2018 – partly because of weaker range three times, from 2.25%–2.50% to 1.50%–1.75%. At momentum in global trade. Growth fell from 6.6% to 6.1% the long end, 10-year US Treasury yields fell from 2.69% in China, from 6.8% to 4.8% in India, from 2.3% to 1.1% in to 1.90%. The Swiss National Bank (SNB) maintained an Russia, and from 1.3% to 1.2% in Brazil. interest rate of –0.75% on sight deposits in excess of a given exemption threshold, while the 10-year Swiss government Mixed financial-market and macro climates bond yield went from –0.24% at the start of the year to –0.51% at the end, after volatile movements that included 2019 was an excellent year for stock markets. The main a dip below –1.10% in the summer. In the eurozone, the indices recovered from the end-2018 rout, climbing ECB cut its deposit facility rate from –0.4% to –0.5%, while steadily throughout the year. The economic climate was in Germany, the 10-year Bund yield moved into negative somewhat bleak, as growth slowed and both trade and territory, falling from 0.25% at the start of January to –0.18% geopolitical tensions heightened, but fears of a recession at end-December. ultimately proved unfounded. What’s more, both US and EU monetary policies were loosened, and bond yields Inflation remained low around the world. In Switzerland, remained very low or even negative. inflation fell slightly from 0.9% in 2018 to 0.4% in 2019, due to lower prices for petroleum products and medicines. Equities therefore remained the most attractive option Prices rose 1.2% in the eurozone and 2.3% in the US. for investors, and the main indices all advanced. In the US, the S&P 500 gained 30.2%, while in Switzerland, the Swiss In the precious metals market, the gold price rose in dollar Market Index (SMI), made up of the largest companies terms, ending the year up 18.4% at USD 1,515 per ounce. In listed on the SIX Swiss Exchange, ended the year up 26.0%. Swiss-franc terms, gold rose 16.4% at CHF 47,223 per kilo. The Euro Stoxx 50 eurozone blue-chip index rose 28.5%, and the MSCI Emerging Markets Index (USD) rose 31.1%. Weaker Swiss economy
In the fixed-income market, the main development in 2019 The lackluster global economic climate and the strong Swiss was a broad-based fall in bond yields, which reached a low franc inevitably took their toll on the Swiss economy. The in the summer on the back of recession fears and looser economy had gained momentem in 2018 following three monetary policies in several countries. At the short end of difficult years (from 2015 to 2017) after the SNB dropped the yield curve, after hiking rates nine times between 2015 the euro/franc exchange-rate floor, but it lost ground in
Interest rates Stock-market indices in local currency terms as % base of 100 at 31 December 2018 0 140 -0.2 130 -0.4 -0.6 120
-0.8 110 -1.0 100 -1.2 -1.4 90 01/2019 04/2019 07/2019 10/2019 12/2019 01/2019 04/2019 07/2019 10/2019 12/2019 SNB Libor target range Sources: SNB, omson S&P 500 MSCI Emerging Markets Source: omson (until 12 June 2019) Reuters Datastream SMI Euro Stoxx 50 Reuters Datastream SNB policy rate (from 13 June 2019) 3-month Libor in Swiss francs 10-year Swiss government bonds
30 2019 Annual Report 31 Year in Review – Economic Environment
2019 with GDP growth slowing to 1.3%, from 2.3% in 2018 according to January 2020 figures from the CREA Institute of (adjusted for fluctuations in income generated by major Applied Economics in the Business and Economics Faculty international sporting events). of the University of Lausanne. Like their peers elsewhere in the country, Vaud’s manufacturers were affected by the Despite this weakness, the average Swiss unemployment global economic downturn and the stronger Swiss franc. rate continued to fall, dropping from 2.6% in 2018 to 2.3% in The CVCI’s fall economic survey also showed a slight decline 2019, its lowest level in almost 20 years. The Swiss economy in business for manufacturers. Vaud’s exports amounted to also continued to create jobs: in the fourth quarter of 2019, CHF 13.6bn in nominal terms, down 1.9% but still close the number of secondary- and tertiary-sector jobs was up to their all-time high. Exports were boosted by greater 1.1% year on year, totaling 4.0m (on a full-time-equivalent demand for machinery, precision instruments, watches, and basis). The number of jobs rose 1.3% in the secondary soft commodities. The largest increases in exports were to sector to 1.0m and 1.0% in the tertiary sector to 3.0m. the US and China. Vaud’s economy enjoyed firm domestic demand and, according to the CVCI survey, service-sector However, there was a contrast between export-oriented companies saw business levels rise. sectors and those focusing more on the domestic market. For the former, and particularly the machinery industry, The Vaud job market was also firm. The number of jobs the sluggish global economy and strong Swiss franc had (on a full-time-equivalent basis) in the Canton was up a noticeable impact. However, with support from the 2.1% year on year in the fourth quarter of 2019, driven by a pharmaceutical industry, Swiss exports grew 3.9% in 2.7% increase in the secondary sector. Tertiary-sector jobs nominal terms to CHF 242.3bn, a new record. Domestically, experienced slightly more limited growth of 1.9%. As in strong consumer spending continued to support Switzerland as a whole, the unemployment rate in Vaud fell Switzerland-focused businesses. to an almost 20-year low; it went from an average of 3.8% in 2018 to 3.5% in 2019. However, that figure masks regional Slower growth in Vaud Canton differences. Unemployment was below the Vaud Canton average in Gros-de-Vaud (2.4%), Lavaux-Oron (2.6%), Vaud’s economy followed the same trajectory as that of Morges (2.7%), Nyon (2.9%), and Broye-Vully (3.2%), while Switzerland as a whole, with GDP growth slowing from it was close to the average in Jura-Nord Vaudois (3.3%) and 2.8% in 2018 to 1.5% in 2019 (adjusted for fluctuations in Aigle (3.6%). Unemployment was above average in Riviera- income generated by major international sporting events), Pays-d’Enhaut (3.8%), West Lausanne (4.1%), and Lausanne (4.5%).
Real-estate market still relatively firm
Vaud and Swiss GDP growth The environment remained favorable for the Vaud real- as % estate market in 2019. In particular, prices of owner- occupied housing continued the upward trend that started 5 in early 2017. On average across the Canton, prices of 4 single-family homes rose 2.8% year on year and apartment 3 prices were 2.3% higher, according to Wüest Partner figures. 2 With prices now at record levels in many regions, they 1 are no longer increasing at the same rate as they were 0 between 2006 and 2012. Price growth also slowed relative -1 to 2018, when single-family homes posted a rise of 4.6% -2 and apartments 2.5%. -3 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 High prices, stringent criteria for home buyers, and weaker Vaud Data adjusted for new SECO accounting treatment of income generated by Switzerland major international sporting events population growth limited the number of potential Year-over-year change in real terms Sources: CREA, FSO, SECO buyers. However, low interest rates continued to attract
32 2019 Annual Report 33 Year in Review – Economic Environment
households with sufficient income and capital to consider However, the investment real-estate market remains strong buying a home. Nevertheless, there were several signs of for both institutional investors and individuals seeking a slowdown in the market for owner-occupied housing. alternatives to putting their money in fixed income. The construction of such housing is on a downtrend – Prices rose and spending on rental property construction there have been around 5,000 new home starts per year in increased sharply, suggesting that the rental market will Vaud since 2013, but the proportion intended for owner- continue to ease. Some observers are concerned that there occupiers has fallen from around two-thirds on average will eventually be a correction in the prices of investment between 2005 and 2015 to around 30% in 2019. The housing properties, caused by a combination of high prices, large- market is also becoming less stretched. Since hitting a low scale construction activity, and slower population growth. of 0.4% in 2009, the vacancy rate has been rising, reaching 1.1% in 2019, and rents have fallen by almost 20.0% overall in Vaud since 2014.
Vaud Canton and Switzerland in figures
Vaud Switzerland Area 3,212 km2 41,285 km2 Population (end-2019)1 808,066 inhabitants 8,600,557 inhabitants Population density 251 inhabitants/km2 208 inhabitants/km2 Working population2 412,725 4,577,875 (2018) Number of companies3 60,526 684,167 Primary sector 6.4% 7.9% Secondary sector 13.4% 14.0% BCV Immobilier Tertiary sector 80.2% 78.1% Jobs 447,141 5,180,170 In 2019, BCV published two more issues of BCV Primary sector 3.0% 3.1% Immobilier – a half-yearly report on the Vaud real-es- Secondary sector 16.3% 20.8% tate market that first appeared in 2017. These latest Tertiary sector 80.7% 76.0% issues looked at the Yverdon-les-Bains region and at renovations. Although no substitute for advice from a Unemployment rate 3.5% 2.3% real-estate professional, these 24-page guides provide (2019 average) valuable information to prospective buyers, homeown- GDP (2019 est.)4 CHF 56.1bn CHF 697.3bn ers, individuals, and businesses wanting to keep up to GDP/inhabitant CHF 69,560 CHF 81,074 date with market developments. 1) Vaud: Source = Statistique Vaud; Switzerland: Source = estimate based on quarterly FSO data 2) Permanent residents aged 15 and over The reports (in French only) can be downloaded from 3) A company or part of a company (e.g., a workshop or factory) located in a given place 4) Data adjusted for new SECO accounting treatment of income generated by major the BCV website at bcv.ch. international sporting events Sources: FSO, Statistique Vaud, SECO, CREA
32 2019 Annual Report 33 Year in Review – Economic Environment
Outlook banks also took action, with the ECB moving to help SMEs get funding and stepping up its debt purchases. The Fed brought There were already several downside risks for the macro down its target range twice, from 1.5%–1.75% to 0%–0.25%. outlook as 2020 began, including the UK’s exit from the EU and several areas of geopolitical tension around the world, Switzerland was also hit by the new coronavirus. Measures but things took a turn for the worse with the coronavirus were taken to limit people’s movements and business pandemic. The hardest-hit countries introduced social activity. Various aid programs on both a federal and cantonal confinement measures in March to try to slow the disease’s level were implemented, amounting to over CHF 40bn as spread and help businesses affected by the crisis. Central at the time of writing. In addition, the SNB intervened in the forex market to stem the appreciation in the Swiss franc. Commercial banks likewise announced targeted measures Real-estate prices in Vaud – among them BCV, which, along with other efforts to indices, base of 100 in Q1 2010 support the local community, suspended H1 loan payments 150 for Vaud SMEs.
140 At the time of writing there was little visibility on how hard economic growth will be hit in Vaud, Switzerland as a 130 whole, and globally by the coronavirus pandemic. In March, 120 SECO downgraded its forecast for full-year GDP growth in Switzerland from a weak (but positive) 1.3% to a contraction 110 of –1.5%. No revised forecasts were available for Vaud at the time of writing, but the outlook has worsened considerably. 100 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beyond the deteriorating global economic climate and Single-family homes Source: Wüest Partner upward pressure on the Swiss franc, other downside risks Rental apartments include relations between Switzerland and the EU. One Condominium apartments supporting factor long-term will be the new Vaud business tax reform, which took effect in 2019.
Housing vacancy rates in Vaud average at 1 June 2019: 0.9% Further moderate population growth
The slowdown in Vaud’s population growth over the Broye-Vully last few years continued in 2019. The Canton welcomed Jura-Nord vaudois 5,900 new residents, taking the total number of people living here to around 806,100 at the end of 2019. At 0.7%, Gros-de- Vaud population growth was similar to that seen in 2018, but significantly lower than in 2017 (1.0% or 8,249 people) and Morges Lausanne Lavaux- the average over the last ten years (1.7% or 11,800 people). Oron West Riviera-Pays d’Enhaut Nyon Lausanne The weaker demographic trend in 2019 reflects a decline Lake Geneva in net immigration. While the number of Swiss citizens Aigle rose by 1.0% (5,525 people), the number of foreign 0.0% to 0.5% nationals rose by only 0.2% (401 people). This was partly 0.5% to 1.0% due to high numbers of foreigners taking Swiss citizenship 1.0% to 1.5% following a change in Swiss nationality law in 2018.
Above 1.5% Source: Statistique Vaud
34 2019 Annual Report 35 Year in Review – Economic Environment
Economic sectors in the Canton Favorable weather conditions meant that 2019 was a good year for wine harvests. Unlike in 2018, regular Vaud Canton has a highly diversified economy, which rainfall in wine-growing regions was generally sufficient, enabled it to endure the difficult years of the global except in some areas where watering was required economic crisis and maintain healthy growth rates, cope during the summer. Fungal diseases and pests were kept fairly well with the impact of the SNB’s decision to scrap under control. Although new wine production fell 5.3% the euro/Swiss franc exchange-rate floor in 2015, and to 28.0m liters, it remained higher than the average over stage a recovery since then. Most of the Canton’s main the previous 10 years. The amount of wine cellared was economic sectors held up relatively well in 2019, although lower than expected for reds, while for whites made from to varying degrees. chasselas grapes it was close to quota levels. According to Vaud’s Department of Agriculture and Winegrowing, Primary sector wines still in tank are well-balanced and expressive, suggesting that 2019 will be an excellent vintage. Although 2019 was a very warm year, there was enough However, the wine industry experienced tougher market rainfall for Vaud’s agriculture sector to increase its yields. conditions caused in particular by falling consumption Data from the Federal Statistics Office (FSO) show that and by competition from foreign wines. the value of farming output rose 1.6% to CHF 1.2bn, while total farm income was up 2.5% to CHF 357m. Income Secondary sector from major crops (grain, industrial crops, and potatoes) rose 7.0% compared with a drought-hit 2018. 2019 was Compared with 2018, the secondary sector saw greater also a good year for feed crops (+20.8%) and livestock headwinds in 2019, with weaker global growth and a (+0.8%). However, there were declines in income from stronger Swiss franc. According to the CVCI fall 2019 fruit (–1.2%), vegetable (–4.0%), and wine (–4.2%) crops. survey, manufacturing companies viewed the deterioration
Vaud is a major contributor to Swiss farming output (11% by value), second only to Bern. The Canton accounts for the largest share (18%) of the country’s crop production. 2019 growth by economic segment in Vaud It is Switzerland’s leading producer by value of grain, Growth above 2% industrial crops, potatoes, and fresh vegetables, but is Water and electricity production and distribution less active in the production of livestock and feed crops. Chemicals, pharmaceuticals, rubber, glass, metallurgy, etc. Machinery, instruments, watches, etc. Hotels and restaurants Food, textiles, leather, wood, paper Change in farming income Growth of 0.5% to 2% as % Finance and insurance 30 Real estate, business services, etc. 25 Construction Wholesale and retail distribution, repairs, etc. 20 Government administration, healthcare, education, 15 sports, etc. 10 5 Growth of –0.5% to –2% 0 Transport, postal services, telecommunications, -5 publishing -10 -15 Primary sector 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net income in Vaud Source: FSO Sources: CREA, FSO, SECO Net income in Switzerland
34 2019 Annual Report 35 Year in Review – Economic Environment
in business conditions as moderate, although conditions varied between industries. Domestically oriented firms, particularly those operating in the construction industry, benefited from Switzerland’s robust domestic economy.
Manufacturing
The performance of Vaud’s manufacturing industry is closely correlated with the Swiss franc/euro exchange rate, and 2018’s optimism was replaced by much greater caution about the business climate in 2019. In its year-end survey, the CCV found that many manufacturing companies experienced a decline in new orders last year, while the composite business sentiment indicator fell into negative territory in the second half. However, views differed among manufacturers as regards business conditions, with 20% saying they were good, 60% satisfactory, and 20% poor. A BCV report published last year called “Commerce vaudois – Le point sur le «e-»” looked at developments Construction in Vaud’s retail market, and particularly at the changes wrought by e-commerce. From almost zero a quarter of a The construction industry benefited from a large number of century ago, online shopping now accounts for a tenth of projects, particularly for rental housing. The CCV’s indicator purchases made by Swiss households. This fundamental of construction business conditions remained positive trend is coinciding with a tendency for Swiss people to do overall, with respondents reporting strong order books their shopping in neighboring countries – which has in- in structural works, civil engineering, and non-structural creased as the euro has weakened against the Swiss franc and technical fit-out work. Overall, prices remained under – and efforts by retailers to increase productivity. Overall, substantial pressure, and the number of people working in prices and sales volumes are under pressure. One conse- construction rose 4.0% to a 10-year high of 29,214. quence has been the loss of 3,800 jobs – down 11.2% – among Vaud’s retailers between 2008 and 2018. Tertiary sector The report (in French only) can be downloaded from the The tertiary sector also lost momentum, reporting slower BCV website at www.bcv.ch. growth than in 2018. However, sentiment remained firm among business leaders: in the CVCI fall 2019 business- climate survey, 87% of respondents reported being at least Business sentiment in construction satisfied with current business trends. net positive responses 60 Wholesale and retail distribution
40 The operating environment for wholesalers and retailers stabilized in 2019. Concerns from past years remained, 20 such as growing competition from e-commerce, Swiss consumers doing their shopping in neighboring countries, and downward pressure on prices in some segments. Yet 0 the retail sector has gradually recovered from the abrupt -20 removal of the euro/Swiss franc exchange-rate floor in 2015, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 and the CCV’s retail indicator remained in positive territory Vaud Sources: Commission Conjoncture Vaudoise, in 2019. Small, medium-sized, and large retailers, along with Switzerland KOF, Statistique Vaud
36 2019 Annual Report 37 Year in Review – Economic Environment
Structure of the Vaud economy
Share of Full-year Share of Vaud GDP growth Jobs total jobs Sectors and segments (2019) (2010-2019) (2017) (2017)
Primary sector 1.0% –0.2% 13,442 3.0% Agriculture, forestry, hunting, fishing 1.0% –0.2% 13,442 3.0%
Secondary sector 20.0% 2.9% 72,999 16.3% Food, textiles, leather, wood, paper 2.5% –0.2% 11,108 2.5% Chemicals, pharmaceuticals, rubber, glass, metallurgy, etc. 7.0% 9.0% 11,537 2.6% Machinery, instruments, watches, etc. 4.3% –0.5% 17,166 3.8% Water and electricity production and distribution 1.5% –2.2% 4,090 0.9% Construction 4.8% 1.5% 29,098 6.5%
Tertiary sector 79.0% 1.9% 360,700 80.7% Wholesale and retail distribution, repairs, etc. 13.9% 1.6% 54,141 12.1% Hotels and restaurants 1.7% 0.3% 20,960 4.7% Transport, postal services, telecommunications, publishing 5.8% 0.4% 23,635 5.3% Finance and insurance 6.1% 1.5% 17,830 4.0% Real estate, business services, etc. 24.6% 2.0% 87,294 19.5% Government administration, healthcare, education, sports, etc. 25.6% 2.6% 150,125 33.6% Other 1.2% 0.4% 6,715 1.5%
Total Vaud GDP (after adjustments) 100.0% 2.1% 447,141 100.0%
Sources: CREA, SECO, FSO
Composite index of business sentiment in manufacturing Change in exports by year net positive responses as % 40 10 8 20 6 0 4
-20 2 0 -40 -2 -60 -4 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Vaud Sources: Commission Conjoncture Vaudoise, Vaud Source: FSO Switzerland KOF, Statistique Vaud Switzerland
36 2019 Annual Report 37 Year in Review – Economic Environment
non-specialist stores such as supermarkets, had similar views similar levels to previous years. However, service companies about the business climate. In Switzerland as a whole, retail reported that the difficulty of hiring new staff was one of sales picked up in real terms after several difficult years. the main factors holding back their businesses. The food and non-food segments continued to move in opposite directions: while food sales rose, sales of decorative Regional overview items, household appliances, clothing, footwear, and cultural and leisure goods all continued to fall. The broad trends discussed in the previous pages were reflected in the various regions of Vaud Canton. However, Hospitality services each region has specific points worth mentioning.
Hotels benefited from excellent weather conditions, Broye including good snowfall in the 2018–2019 and 2019–2020 winter seasons, a hot, dry summer and visitors attending Residential construction slowed in 2019 in terms of both the Fête des Vignerons in Vevey. As a result, the number rental properties and single-family homes, although of overnight stays in the Canton increased by 1.6%. This there was an upturn in projects to build owner-occupied increase was driven by guests from Switzerland and to a apartments. Recently, the vacancy rate in Broye has lesser extent from the US, China, the UK, and Belgium; the been significantly higher than the cantonal average; this number of guests from other European countries declined gap widened in 2019, when it rose to 2.8% from 2.1%. broadly. Conditions in the restaurant trade improved, However, prices of owner-occupied housing continued driving an increase in sales and profits according to the CCV to increase, rising 3.3% for single-family homes and 2.8% survey. The upturn was felt more by large restaurants – with for apartments. Farmers had to contend with challenging nine or more employees – than by small establishments. weather conditions in 2019, including a summer drought.
Services Chablais
Business and personal services, which cover a variety of Tourism and mountain resorts had another solid year activities and form a large part of the Vaud economy, were thanks to snow in the winter, sun in the summer, and supported by firm domestic demand. The business trend the success of the multi-resort “Magic Pass” ski pass. In indicator remained in positive territory in 2019 and at the real-estate market, the vacancy rate declined from
Value of work from building permit applications in Vaud Business sentiment in the retail sector in CHF billions net positive responses 7 60 6 40 5 4 20
3 0 2 -20 1 0 -40 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total building permit applications Source: Statistique Vaud Vaud (Lake Geneva Sources: Commission Conjoncture Vaudoise, KOF, Statistique Vaud Applications for housing region until 2011) Applications for manufacturing, crafts Switzerland and trades, and services
38 2019 Annual Report 39 Year in Review – Economic Environment
2.4% in 2018 to 2.1% in 2019. Building activity was again Hospital, and the new International Olympic Committee firm, as a pickup in the construction of owner-occupied headquarters. In the hotel industry, prices have levelled apartments offset a decline in the development of new off, and the city’s Flon district now boasts a mid-market rental properties. Manufacturers had a good year, albeit urban hotel run by an international hotel chain. Despite slightly softer than in 2018. Wine-makers were hit by an downward pressure on margins, construction activity oversupply in the bulk market. continued apace as new rental properties were built.
Gros-de-Vaud Lavaux
Business levels were generally good for companies in this The real-estate market expanded slightly after two years region. The construction of new housing slowed, although of flat growth. Available land is scarce, and a number of – in view of the public notices that have been and continue projects near Lausanne – such as in Lutry and Pully – involve to be issued – new neighborhoods will soon be developed. replacing old buildings with new residential properties. These projects will bring in additional residents, which has Prices remained high in the larger towns in the southern prompted a number of towns and town groupings to invest part of the region. New construction work is underway heavily in infrastructure. Like elsewhere in the Canton, prices in the northern part of the region, including in Oron and in the construction industry did not advance. Measures Mézières. Added constraints under Switzerland’s amended are being studied to make up for the lack of the space for regional planning act are hindering this industry’s potential, artisanal businesses in the region. Local manufacturers were yet a number of sizeable public infrastructure projects resilient, even though competition remained tough. are currently in progress. These include schools in Oron, Carouge, and Mézières, roadwork, and the renovation and Lausanne expansion of municipal water systems.
The 3.4% rise in overnight hotel stays reflects the appeal Morges of the Canton’s capital – which a UK magazine recently named the best small city in the world. Lausanne’s appeal The impending completion of a number of major rental increased following the reopening of the fine arts museum projects should ease pressure on the vacancy rate, which and the openings of the Malley sports center, the Agora remained low at 1.0% in 2019. Demand for owner- cancer research building near the Lausanne University occupied apartments was firm, and prices were stable. As
Sales index in the hotel and restaurant industry Sales index in the services sector net positive responses net positive responses 60 60
40 50 20 40 0 30 -20 20 -40 -60 10 -80 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Vaud Sources: Commission Conjoncture Vaudoise, Vaud Sources: Commission Conjoncture Vaudoise, KOF, Statistique Vaud KOF, Statistique Vaud Switzerland Switzerland
38 2019 Annual Report 39 Year in Review – Economic Environment
a result, construction firms had a good year even though Riviera their margins were held in check. Manufacturers reported solid figures, yet they kept a close eye on the Swiss The region’s real-estate market continues to enjoy strong franc exchange rate. Wine-makers became concerned demand, and numerous construction projects firmed up about the rise in inventories following bountiful, high- after the Montreux land-use plan was approved. Despite quality harvests in the past two years and a retreat in changing consumption patterns related to the rise in consumption. e-commerce, the retail sector did not lose ground – new businesses continued to be created and more and more Nord Vaudois outside chains moved into the region. Hotel volumes were strong thanks to the many events in the region such The watchmaking industry fared well overall in 2019 as the Montreux Jazz Festival, the Fête des Vignerons, despite a softer year-end. Manufacturers in segments like and the Montreux Christmas market. The renovation of machinery, precision instruments, and plastic injection the Montreux Music & Convention Centre, if ultimately – which either export their products or supply local firms – approved, would further buoy the local economy in the also posted favorable results. The Y-Parc technology park coming years. continued to grow, and several major businesses are in the process of moving there. The real-estate market remained relatively stable in terms of both prices and demand in Yverdon-les-Bains, Orbe, Chavornay, and Grandson. In the farming sector, grain harvests were plentiful while beet production was low. Several vegetable crops were damaged by hailstorms.
Nyon
This region’s appeal was enhanced further in 2019 by the new Léman-Express commuter rail service. Another positive sign was the completion of two major business- hotel projects in Nyon and Founex. At the same time, the dynamic life sciences industry attracted further investment. The real-estate market continued to do well, with property prices edging up on resilient demand. In construction, order books were at high levels, yet prices remained contained. Wine-crop yields were abundant and the quality was good; as in other regions of the Canton, however, inventories are still building up.
40 2019 Annual Report 41 Year in Review – Economic Environment
Economic structure by BCV region
Gros-de- Nord Broye Chablais Vaud Lausanne Lavaux Morges Vaudois Nyon Riviera Population at end-2019 34,515 50,772 64,706 236,764 62,136 78,073 93,972 101,855 83,345 Population growth +1.8% +0.6% +0.8% +0.5% +1.1% +1.0% +0.7% +1.1% +0.2% in 2019 Proportion of Canton’s 4.3% 6.3% 8.0% 29.4% 7.7% 9.7% 11.7% 12.6% 10.3% population Jobs (2017) 15,046 22,348 24,219 192,205 21,035 40,063 48,173 44,430 39,622 Proportion of Canton’s 3.4% 5.0% 5.4% 43.0% 4.7% 9.0% 10.8% 9.9% 8.9% jobs Jobs in the primary 9.1% 7.9% 6.5% 0.1% 6.4% 5.8% 5.3% 3.7% 1.5% sector Jobs in the secondary 25.2% 21.4% 31.1% 10.3% 16.6% 21.1% 29.7% 15.2% 10.2% sector Jobs in the tertiary 65.7% 70.7% 62.4% 89.5% 77.0% 73.1% 65.0% 81.1% 88.3% sector Average 3.0% 3.5% 2.6% 4.4% 2.6% 2.6% 3.2% 2.8% 3.7% unemployment in 2019 Change in –0.4% –0.3% –0.1% –0.3% –0.1% –0.2% –0.2% –0.2% –0.1% unemployment in 2019
Sources: Statistique Vaud, FSO, SECO
40 2019 Annual Report 41 Year in Review BCV in 2019
We delivered very solid results in 2019 – our best in a 2012 period, and the 2019 growth figures came in below decade. Despite the negative-interest-rate environment, the 2018 figures of 4.6% and 2.5%, respectively. total revenues were up 3% to CHF 1.0bn. Thanks to firm cost control – operating expenses edged up just 1% to Continued growth in customer-driven business volumes CHF 504m – operating profit rose 4% to CHF 419m. Net profit rose 4% to CHF 363m, reflecting that higher Mortgage lending rose 4%, or CHF 937m, to CHF 27.0bn. operating profit as well as a lower tax expense following the Other loans were up by 1% (+CHF 75m), to CHF 5.8bn. implementation of Vaud Canton’s corporate tax reform. On the liabilities side, customer deposits grew further, rising 5%, or CHF 1.7bn, to CHF 33.0bn. Total assets grew 1% to In 2019, we also continued to execute on our strategic CHF 48.4bn. priorities. One such priority is to enhance our online services as customers increasingly migrate to digital The Group’s assets under management expanded 12% channels. Our goal here is to allow customers to conduct to CHF 97.8bn. Net new money totaled CHF 3.8bn. This almost all of their day-to-day banking through the figure comprised CHF 1.5bn in fund inflows from personal channel of their choice. Our online channels are now banking customers and Vaud SMEs as well as CHF 2.3bn used by more than 60% of our customers. The BCV from large-corporate and institutional clients. Mobile banking app is continuing to gain users: three out of every four connections to our online banking platform Financial results now take place through the app, and a third of all users log in only on their smartphone. BCV Group’s revenues rose 3% to CHF 1.0bn. In an environment marked by continued negative interest A mixed economic environment rates, net interest income before loan impairment charges/reversals was steady at CHF 497m. Net interest The global economy lost steam last year. Growth fell to a income grew 3% to CHF 507m, driven by a net reversal of 10-year low, mainly because of trade tensions between the loan provisions. Net fee and commission income was up US and China and deceleration in the eurozone and China. 2% to CHF 323m. Net trading income, which derives mainly from client forex trading activities, was stable at CHF 128m. Both the Vaud economy and that of Switzerland as a whole Other ordinary income rose 8% to CHF 44m. were affected by the global downdrafts. Switzerland’s GDP growth eased from 2.3% in 2018 to 1.3% in 2019, Operating expenses increased 1% to CHF 504m. Personnel and that of Vaud from 2.9% to 1.5%. Both the Swiss and costs were up 2% to CHF 339m after a number of IT Vaud economies were nevertheless underpinned by firm consultants were added to the headcount. Other operating domestic demand. expenses were down 1% to CHF 165m. Depreciation and amortization rose 4% to CHF 71m, due mainly to The real-estate market in Vaud remained firm, as prices for investments in digital banking. Operating profit was up 4% owner-occupied homes continued on the uptrend that to CHF 419m. began in 2017. On average, prices for single-family homes rose 2.8% year on year, while those for apartments were Net profit rose 4% to CHF 363m, reflecting higher operating up 2.3%, according to data from Wüest Partner. However profit and lower tax expense following the implementation real-estate is expanding more slowly than during the 2006– of Vaud Canton’s corporate tax reform.
42 2019 Annual Report 43 Year in Review – BCV in 2019
The cost/income ratio went from 57.6% to 57.7%. In an country. Business in cross-border wealth management environment still marked by negative interest rates, the net remained in line with the trend of the previous year. interest margin stood at 1.07%, down slightly on the 2018 The Sector’s assets under management rose 13% to CHF figure (1.10%). Shareholders’ equity rose 2% to CHF 3.6bn. 72.7bn thanks to net new money from individual and The Group’s Common Equity Tier 1 (CET1) ratio at 31 institutional clients and the strength of the financial December 2019 was 17.1%, and the leverage ratio was 6.3%. markets. The mortgage book expanded by 2% to CHF The Bank’s return on equity stood at 10.4%. 7.8bn. The Sector’s revenues rose 2% to CHF 363m, and operating profit was up 7% to CHF 139m. A new Business sector overview investment advisory service, BCV Conseil, was rolled out for onshore private banking clients. Retail Banking Trading Retail Banking experienced solid business growth in 2019, extending the trend of previous years. Customers The Trading Sector’s various businesses put in mixed continued to enjoy historically low interest rates on their performances in 2019. While volumes were flat in currency mortgage loans without being charged negative interest trading, which accounts for two-thirds of the Sector’s total on their deposits. The mortgage book expanded by 4% to revenues, the Sector’s other businesses reported healthy CHF 8.3bn and customer deposits were up 7% to CHF 9.1bn. growth. Trading revenues climbed 10% to CHF 50m, and Sector revenues grew by 1% to CHF 174m. Operating profit operating profit rose 36% to CHF 22m. Risk levels stayed rose 28% to CHF 37m owing to a decline in both direct and low, as BCV’s trading activities are focused primarily on indirect operating expenses. The Digital & Multichannel customer-driven transactions. Banking Department, part of the Retail Banking Sector, rolled out over 30 new features and functions across all Highlights of the year digital channels. Dividend payment Corporate Banking In 2019, we executed on our dividend policy for the Corporate Banking turned in a satisfactory performance eleventh consecutive year, with an ordinary dividend of overall in view of the prevailing economic conditions. CHF 35 per share. In May, we distributed CHF 301m to Vaud SMEs achieved another year of solid business growth. shareholders, with the Canton of Vaud receiving CHF 202m Trade Finance volumes were down slightly but remained of that amount. For the 2008 to 2018 financial years, we fairly solid, and the Large Corporates business achieved returned a total of nearly CHF 3.1bn to our shareholders. growth in the loan book that mostly offset a controlled decline in off-balance-sheet commitments. Lending and Credit ratings commitments climbed 1% to CHF 17.6bn, while deposits grew 6% to CHF 10.1bn. The Sector’s revenues declined 1% Standard & Poor’s maintained our long-term rating of AA, to CHF 265m, and operating profit also edged down 1%, with a stable outlook, a rating we were first assigned in to CHF 154m. New provisioning needs stayed low as the 2011. Moody’s reaffirmed our long-term rating of Aa2, also corporate loan book remained healthy. with a stable outlook.
Wealth Management New members of the Board of Directors
The Wealth Management Sector had a good year Jean-François Schwarz, who was appointed to the Board across all its businesses in 2019. In onshore private of Directors by the Vaud Cantonal Government in April wealth management, the positive trend seen in recent 2018, took up his position on 1 January 2019, replacing years continued, and institutional asset management Paul-André Sanglard, who had been Vice Chairman. Reto grew its business substantially in both French-speaking Donatsch, a Board member since 2011, became the new Switzerland and the German-speaking part of the Vice Chairman on 1 January 2019.
42 2019 Annual Report 43 Year in Review – BCV in 2019
Key projects and investments Outsourcing of services
One of the highlights of 2019 was in our Wealth We once again entrusted the IBM banking IT center in Management business, where we rolled out our new BCV Lausanne to carry out activities that include data storage, Conseil investment advisory service. It is now available operating and maintaining databases, and operating IT in four formats – Classique, Plus, Premium, and Active systems. Bank employee workstations have been provided Advisory. With this service, our clients can communicate and maintained by Swisscom since 2019. For printing and directly with their advisor or connect via our online mailing banking documents to customers, our service platform, and they can keep track of their portfolio at provider is Swiss Post Solutions SA. This form of IT systems home and on the go. BCV Conseil also provides investment management meets the legal requirements relative to recommendations and the latest financial news. outsourcing. The maintenance and development of our banking platform are handled in-house. We also continued to make improvements to our digital banking services for all our customers. In 2019, we added In addition, BCV uses valuation models supplied by Wüest around 30 new features and functions, including options Partner (hedonic valuation functions for private residential for modifying payment orders and managing payment properties and a capitalization valuation model for income- cards, and a new online cockpit for our SME clients. Our producing real estate). Our contract with Wüest Partner customers can now conduct almost all of their day-to-day complies with legal requirements for the outsourcing of banking whenever and wherever they choose. To take just data storage. a few examples: they can make payments; check account balances; open an account; apply for, renew, or transfer a mortgage; and use BCV TWINT – Switzerland’s digital wallet.
In our Corporate Banking sector, we set up a new business succession team, which brings together our experts in financing, asset management, and pensions. These in-house experts are also backed by a network of external specialists.
Investments
In each of the past three years, we invested between CHF 50m and CHF 70m in infrastructure, equipment, and IT maintenance and development.
44 2019 Annual Report 45 Year in Review – BCV in 2019
Strategy and outlook • Implementing operational improvements through targeted measures; In 2019, the Board of Directors and Executive Board conducted a review of the strategy in place since 2014 and • Increasing our attractiveness as an employer and fostering defined a new strategic plan for the years to come. This continuous skills development among our employees; new plan builds on those we have been implementing for more than ten years and positions the Bank to respond to • Sharpening our focus on corporate social responsibility future challenges. (CSR) measures, including a wider range of sustainable banking products, socially responsible investment This new strategic plan – calledvista – aims to maintain options, and mortgage solutions. the positive trend that the Bank’s business lines have been experiencing over the past few years. It is also designed to In addition, the focus on service quality and our core values position the Bank to respond to the main challenges we will reflects our belief that a common culture shared by all face in the coming years, such as heightened competition, employees is one of the key success factors for our strategy. persistently low interest rates, advancements in digital From this foundation, we intend to generate sustainable technology, and ever-changing customer needs. growth and stable earnings going forward.
For the business lines, we are targeting: Financial targets
• Above-market growth in asset management, SMEs, and In today’s low-interest-rate environment, we are seeking onshore private banking; sustainable growth, with revenues and operating profit trending along the same lines as in recent years. We • At least market growth in retail banking; maintained or slightly adjusted our financial targets: we are still targeting a cost/income ratio of 57%–59% and a • A focus on the profitability of our commodities trade CET1 ratio of at least 13%; our ROE target based on this finance and large corporates businesses; minimum target CET1 ratio is now 13.5%–14.5%. These targets should be viewed from a long-term perspective. • Continued development of our other business lines.
We have identified several strategic focus areas. These goals include:
• Continuing to improve our service quality along the entire value chain to create an even better customer experience;
• Enhancing our distribution channels (branches, digital services, and call centers) to give customers an integrated multichannel experience;
• Capturing more of the cross-selling potential inherent in our universal bank business model;
44 2019 Annual Report 45 Year in Review – BCV in 2019
Business trends at the main subsidiaries
Piguet Galland & Cie SA
Piguet Galland & Cie SA is a private bank with its head office in Yverdon-les-Bains, main branch in Geneva, and three other branch offices across French-speaking Switzerland. It provides a comprehensive approach underpinned by personalized investment solutions to private and institutional clients.
In 2019, Piguet Galland & Cie SA recorded net profit for the year of CHF 2.8m, with revenues from banking operations remaining stable and operating expenses dropping 1%. At end-2019, AuM amounted to CHF 5.8bn.
Gérifonds SA
Gérifonds SA is the fund administrator for BCV and nine other fund distributors. At year-end, assets of funds under management were up CHF 2.2bn (+17%) to CHF 15.5bn. At 31 December 2019, Gérifonds managed 119 funds, 76 of which were registered in Switzerland and 43 in Luxembourg.
Gérifonds’ 2019 revenues increased 7% to CHF 15.7m, while net profit rose 21% to CHF 4.2m.
GEP SA
GEP SA manages the Fonds Immobilier Romand (FIR), a listed, Swiss-registered real-estate fund launched in 1953 and open to private investors. At end-2019, FIR had a portfolio of some 4,000 residences in 146 buildings, most of which are located in the Lake Geneva region.
At 31 December 2019, total assets were CHF 1.3bn (+5%) and rental income stood at CHF 69m. In light of the increasingly competitive property market, FIR has adopted a highly selective growth strategy based on acquiring buildings in prime locations and developing new projects. In 2019, 169 new rental units in Fribourg and Lausanne were put on the market and two new buildings were purchased in the Greater Lausanne region.
46 2019 Annual Report 47 Year in Review – BCV in 2019
46 2019 Annual Report 47 Year in Review Business Sector Reports
Retail Banking this platform. Our retail banking operations are an integral part of our image as the bank of choice for the people • Retail Banking experienced solid business growth of Vaud. We provide advice to customers in all phases of in 2019, extending the trend of previous years. their lives, offering ongoing support through our broad Customers continued to enjoy historically low array of products and services. interest rates on their mortgage loans without being charged negative interest on their deposits. Retail Banking’s experienced management and comprehensive product range also make it a key training • The mortgage book expanded by 4% to CHF 8.3bn ground for BCV’s staff. Many employees working in BCV’s and customer deposits were up 7% to CHF 9.1bn. other business areas started their careers as trainees, interns, or employees in Retail Banking. Retail continues to • Sector revenues grew by 1% to CHF 174m. Operating fulfill this role and frequently transfers staff to BCV’s other profit rose 28% to CHF 37m owing to a decline in divisions. both direct and indirect operating expenses. 2019: business report • The Digital & Multichannel Banking Department, part of the Retail Banking Sector, rolled out over Conditions in the Vaud real-estate market remained 30 new features and functions across all digital positive in 2019. Selling prices on owner-occupied housing channels. continued trending upwards after easing between 2013 and 2016. The market was supported by low interest rates Business and strategy coupled with a lower supply of new homes intended for owner-occupiers and a concomitant increase in In 2019, Retail Banking employed 362 people. They serve investments in rental properties. However, the market the banking needs of around 370,000 individuals with continued to soften, as illustrated by the housing vacancy assets of up to CHF 250,000 or mortgages of up to CHF rate, which edged up from 1.08% at end-2018 to 1.11% a 1.2m. In addition to current accounts, savings accounts, year later. credit cards, and home loans, BCV offers a full range of banking products such as investments, financial planning Against this backdrop, Retail Banking grew its business services, and trading via our online platform, TradeDirect volumes. The mortgage book expanded by 4% (to CHF (tradedirect.ch). 8.3bn), in line with the growth recorded in the Vaud property market. Customer deposits continued to climb, Most of BCV’s customers first came to the Bank for retail reaching CHF 9.1bn (+7%) at end-2019. banking services. We offer a comprehensive range of distribution channels: 63 branch offices providing dense Sector revenues also rose, by 1% to CHF 174m, while coverage of Vaud, a network of more than 220 ATMs operating profit jumped 28% to CHF 37m owing to a across the Canton, a highly efficient call center, and an decline in both direct and indirect operating expenses. internet banking platform, BCV-net, that can be accessed using a computer or a mobile device such as a smartphone Continually improving the quality of customer service is the or tablet. BCV-net is used by 60% of our customers, and Bank’s number one strategic goal. In 2019, Retail Banking more than eight out of every ten payments are made via took steps to enhance the customer experience in BCV’s
48 2019 Annual Report 49 Year in Review – Business Sector Reports
branch offices, with the Avenches and Bussigny branches Objectives and outlook moving into new premises. The new range of all-in-one banking packs for families was extremely popular, since Over the next few years, Retail Banking will continue their low fees make this offering one of the most attractive implementing various initiatives to deliver an improved available. Retail Banking also made improvements to its customer experience embracing all of its distribution digital banking services, with rollouts of several new features channels. Through our close ties with customers and and functions. These improvements focused in particular highly professional approach, we aim to maintain our on the BCV Mobile banking app, and included options for position as the bank of choice for the people of Vaud, modifying payment orders and managing payment cards while continuously adapting to customers’ changing more flexibly; we also made it possible for BCV TWINT behaviors and market trends. Our aim is to offer a customer users to link more than one account to the app. experience that seamlessly and efficiently combines all distribution channels.
2015–2019 financial data
Mortgage loans Customer deposits in CHF billions in CHF billions 8.3 9.1 7.7 7.9 8.0 8.5 7.6 8.4 8.0 8.3
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Key figures 2019 2018 Total revenues (CHF millions) 173.7 171.8 Operating profit (CHF millions) 37.1 29.0 Cost/income ratio (excluding goodwill amortization and write-downs) 77% 81% ROE 11.6% 8.7% Headcount 362 359
2018 figures were adjusted to facilitate like-for-like comparisons.
48 2019 Annual Report 49 Year in Review – Business Sector Reports
Corporate Banking 2019: business report
• Corporate Banking turned in a satisfactory In 2019, both the Swiss and Vaud economies lost performance overall in view of the prevailing momentum. GDP growth in the Canton slowed to 1.5% economic conditions. Vaud SMEs achieved another in 2019 from 2.8% in 2018 (adjusted for fluctuations in year of solid business growth, Trade Finance volumes income generated by major international sporting events), were down slightly but remained fairly solid, and the according to January 2020 estimates from the CREA Large Corporates business achieved growth in the Institute of Applied Economics. Like the rest of the Swiss loan book that mostly offset a controlled decline in economy, Vaud manufacturers felt the effects of the global off-balance-sheet commitments. economic slowdown and the strong Swiss franc.
• Lending and commitments climbed 1% to CHF The Swiss National Bank maintained an interest rate of 17.6bn, while deposits grew 6% to CHF 10.1bn. –0.75% on sight deposits in excess of a given exemption threshold, and raised that threshold in September 2019. • Sector revenues declined 1% to CHF 265m, and operating profit also edged down 1%, to CHF 154m. It was a volatile year for commodity prices. Oil prices were affected by geopolitical tensions in the Middle East, a • New provisioning needs stayed low as the corporate deceleration in global growth, and sustained production loan book remained healthy. levels in the US. The economic slowdown, particularly in China, also pushed base metal prices down slightly in 2019. Business and strategy Business volumes rose in 2019, with lending and The Corporate Banking Sector comprises three front- commitments up 1% to CHF 17.6bn. Deposits grew 6% to line departments: SMEs, Large Corporates, and Trade CHF 10.1bn despite ongoing low interest rates. Finance. The product range covers all financing needs (e.g., construction loans, financing of production equipment, Lending and commitments to Vaud SMEs continued to working capital, and international trade finance) and expand (+5%). In the Large Corporates segment, a decline provides cash-management services along with instruments in off-balance-sheet commitments was partly offset by for hedging exchange-rate and interest-rate risk. growth in lending, resulting in a net decrease of 2% year on year. Trade Finance volumes also contracted, with average Corporate Banking is continuing to expand its SME lending and commitments down 2% versus 2018. customer base in order to consolidate its already-strong presence in the Vaud economy. More than half of the The Sector’s revenues declined by 1% to CHF 265m, and Canton’s SMEs bank with BCV, and BCV has relationships operating profit edged down 1% to CHF 154m. The loan with most of Vaud’s major corporations. The Sector’s Large book remained healthy and new provisioning needs were Corporates Department offers a broad range of services well below expectations. to companies elsewhere in French-speaking Switzerland and, on a more selective basis, in German-speaking areas of the country. The Lake Geneva region is a global center for commodities trading and is home to a large number of trading firms. BCV has recognized strengths in serving these companies, particularly in the key markets in which we specialize, such as metals, soft commodities, and energy. The Sector focuses on certain key markets and systematically monitors all of its trade finance transactions.
50 2019 Annual Report 51 Year in Review – Business Sector Reports
Objectives and outlook
Corporate Banking will seek to increase its presence among local SMEs and ensure maximum responsiveness to their needs, standing with them during these still-uncertain economic times and throughout their life cycle – from creation to succession.
The Trade Finance and Large Corporates businesses will maintain their approach, based on maximizing profitability in line with the Bank’s risk profile.
2015–2019 financial data
Lending and off-balance-sheet commitments Customer deposits in CHF billions in CHF billions 10.1 17.3 17.6 9.6 15.7 16.3 8.7 9.0 14.9 8.2
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Key figures 2019 2018 Total revenues (CHF millions) 264.7 266.9 Operating profit (CHF millions) 154.1 156.4 Cost/income ratio (excluding goodwill amortization and write-downs) 35% 35% ROE 10.1% 9.2% Headcount 188 188
2018 figures were adjusted to facilitate like-for-like comparisons.
50 2019 Annual Report 51 Year in Review – Business Sector Reports
Wealth Management business scene. BCV is already the leading institutional asset manager in Vaud Canton. We are now pressing ahead with • The Wealth Management Sector had a good year our strategy to grow this business elsewhere in Switzerland. across all its businesses in 2019. In onshore private To achieve this, we are capitalizing on the occupational wealth management, the positive trend seen in pension expertise we have gained through Fondation recent years continued, and institutional asset BCV Deuxième Pilier, which has around 550 member management grew its business substantially in both companies. Having traditionally focused our activities French-speaking Switzerland and the German- in French-speaking Switzerland, we have expanded our speaking part of the country. Business in cross- business in the German-speaking part of the country by border wealth management remained in line with leveraging our investment skills and our ability to create the trend of the previous year. high-value-added financial products.
• The Sector’s assets under management rose 13% Piguet Galland & Cie SA is a 99.7%-owned subsidiary of to CHF 72.7bn thanks to net new money from BCV. It was created following the merger between Banque individual and institutional clients and the strength Piguet & Cie SA and Banque Franck Galland & Cie SA, of the financial markets. The mortgage book which BCV acquired in 2011. It operates out of Geneva, expanded by 2% to CHF 7.8bn. Lausanne, Yverdon-les-Bains, Nyon, and Neuchâtel. Piguet Galland & Cie SA aims to be one of the leading wealth • The Sector’s revenues rose 2% to CHF 363m, and managers in French-speaking Switzerland, offering an operating profit was up 7% to CHF 139m. exclusive, high-end service.
• A new investment advisory service, BCV Conseil, Gérifonds SA, which is a wholly owned subsidiary, provides was rolled out for onshore private banking clients. BCV and other partners with valuable expertise in creating, distributing, managing, and administering investment Business and strategy funds. Its expertise and leading position in the fund market in French-speaking Switzerland have enabled it to build a BCV Group’s wealth management business comprises solid and rapidly expanding portfolio of clients outside the activities of the parent company and those of its BCV Group. subsidiaries Piguet Galland & Cie SA, Gérifonds SA, and GEP SA. Within the parent company, wealth management GEP SA, founded in 1953, is a wholly owned subsidiary is shared by two divisions. The Private Banking Division of BCV. It has unique expertise in real-estate fund serves affluent and high-net-worth individuals, whereas management. It manages Fonds Immobilier Romand (FIR), the Asset Management & Trading Division works with a Swiss-registered real-estate fund listed on the SIX Swiss institutional clients. With nearly 500 employees in wealth Exchange that invests exclusively in residential properties management, BCV Group has a major regional presence in in French-speaking Switzerland. private banking. We are also the Canton of Vaud’s leading institutional asset manager. 2019: business report
In light of the Vaud region’s strong potential in private In private wealth management, the trend seen in recent banking, the Wealth Management Sector is maintaining years continued. In response to changing customer the growth strategy initiated in 2009. Because BCV expectations, evolving regulatory requirements, and operates in all areas of banking, efforts to attract private moves by our competitors, we rolled out BCV Conseil, a clients can be coordinated with other business sectors, new investment advisory service that allows clients to find creating valuable synergies. For example, the Bank’s private the investment approach best suited to their needs and banking business benefits from a steady stream of high- investor profile. potential referrals from Retail Banking, whose client base includes most of the people living in the Canton, and In line with BCV’s decision to sign the United Nations from Corporate Banking, which is very active on the local Principles for Responsible Investment (UNPRI), our asset
52 2019 Annual Report 53 Year in Review – Business Sector Reports
management department incorporated environmental, Objectives and outlook social, and governance (ESG) criteria across its institutional asset management products. We will press ahead with the growth strategy that we implemented several years ago in private onshore wealth Our Zurich-based sales team, which promotes BCV’s management, with the aim of becoming the market leader institutional asset management services, further grew its in Vaud Canton. volumes in German-speaking Switzerland, where we are recognized as a niche player. In institutional asset management, we aim to continue growing our business in Vaud and the rest of French- Cross-border wealth-management business volumes were speaking Switzerland, as well as in the German-speaking in line with the trend of the previous year. part of the country through our representative office in Zurich. As a creator and distributor of investment products, The Sector’s assets under management grew 13% to Asset Management will continue to design innovative CHF 72.7bn thanks to net new money from private and investment strategies. We will keep developing our product institutional clients and the strength of the financial range in line with client needs and new investment styles. markets. Outflows of offshore funds were very low in 2019. The mortgage book continued to expand at a moderate Piguet Galland & Cie SA is aiming to grow its business in pace of 2%, reaching CHF 7.8bn. French-speaking Switzerland’s wealth management market and will continue to generate synergies with BCV. The Sector’s revenues rose 2% to CHF 363m, and operating profit was up 7% to CHF 139m.
2015–2019 financial data
Assets under management Mortgage loans in CHF billions in CHF billions 72.7 7.8 68.3 7.4 7.5 7.7 64.2 64.1 64.4 7.2
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Key figures 2019 2018 Total revenues (CHF millions) 362.6 354.3 Operating profit (CHF millions) 138.7 129.9 Cost/income ratio (excluding goodwill amortization and write-downs) 60% 61% ROE 33.3% 29.2% Headcount 499 498
2018 figures were adjusted to facilitate like-for-like comparisons.
52 2019 Annual Report 53 Year in Review – Business Sector Reports
Trading 2019: business report
• The Trading Sector’s various businesses put in mixed 2019 was an excellent year for stock markets. The main performances in 2019. While volumes were flat in indices recovered from the end-2018 rout, climbing currency trading, which accounts for two-thirds steadily throughout the year. The economic climate was of the Sector’s total revenues, the Sector’s other somewhat bleak, as growth slowed and both trade and businesses reported healthy growth. geopolitical tensions heightened, but fears of a recession ultimately proved unfounded. In addition, US and EU • Trading revenues climbed 10% to CHF 50m, and monetary policies were loosened, which kept bond yields operating profit rose 36% to CHF 22m. very low or even negative. Equities therefore remained the most attractive option for investors, and the main indices • Risk levels stayed low, as BCV’s trading activities are all advanced by more than 20%. focused primarily on customer-driven transactions. In the forex market, the Swiss franc again edged upward. Business and strategy The euro fell 3.2% against the franc, dropping from CHF 1.12 to CHF 1.09, while the dollar lost 1.4% over the year, We aim to meet our customers’ trading needs and to offer sliding from CHF 0.98 to CHF 0.97. them a broad array of products and services. To achieve this, we have one of the largest trading floors in French-speaking Overall activity in the Trading Sector was firm in 2019. While Switzerland. Our traders operate directly on the SIX Swiss revenues were flat in currency trading, which accounts for Exchange. Our Trading Sector focuses on investment and two-thirds of the Sector’s total revenues, the Sector’s other hedging products (currencies, equities, bonds, derivatives, businesses (Structured Products, and Equities, Bonds & and structured products) that are denominated primarily Fixed Income) reported solid growth. in Swiss francs and aimed at clients based mainly in Switzerland. More than a third of customers who trade Full-year revenues rose 10% to CHF 50m, and operating currencies directly through BCV’s trading floor use our profit increased by 36% to CHF 22m. e-FOREX platform. The Sector’s risk profile remained very low, with an average Our trading floor focuses on client transactions. This means Value-at-Risk (1-day, 99%) of around CHF 0.2m over the that the Bank’s risk levels are low. course of the year.
The Sector’s activities come under the Asset Management & Trading Division, which encompasses asset management, investment policy, and the trading floor. That combination enables us to make the most of synergies between the trading floor and the Asset Management Department, helping us to provide investment products that are responsive to customer needs and consistent with our investment policy.
54 2019 Annual Report 55 Year in Review – Business Sector Reports
Objectives and outlook
In the coming years, the Trading Sector will further develop its range of services to focus on customers’ core trading needs. Our products for both hedging and investment purposes will continue to meet strict transparency criteria.
In forex and structured products, the Sector will seek to win new customers and build on existing relationships by offering excellent service and products.
2019 financial data
Breakdown of trading income by segment Exchange rates versus CHF Forex 64% Miscellaneous 5% 1.4 Stocks, bonds, and 1.2 interest-rate products 7% 1.0 Structured products 24% 0.8 0.6 0.4 0.2 0.0 01/2019 04/2019 07/201910/2019 12/2019 EUR Source: omson Reuters Datastream USD
Key figures 2019 2018 Total revenues (CHF millions) 50.1 45.3 Operating profit (CHF millions) 21.9 16.1 Cost/income ratio (excluding goodwill amortization and write-downs) 55% 62% ROE 29.4% 15.0% Headcount 55 56
2018 figures were adjusted to facilitate like-for-like comparisons.
54 2019 Annual Report 55
Risk Management
1. General approach 1.2 Principles
1.1 Objectives Risk management at BCV is based on the following ten principles: The business of banking is to take on strategic and business 1. BCV takes on strategic and business risk, credit risk, and risk, market risk, and credit risk in order to create economic market risk with the aim of generating economic profit. profit. Indirectly, this entails exposure to operational risk. 2. BCV seeks to minimize its exposure to the operational BCV manages these risks in an integrated and coherent risk it is exposed to as a result of its activities. manner, using a process that encompasses all of the Bank’s 3. Every risk that BCV takes must fall clearly within the activities. The goals of the risk-management process at BCV purview of the Bank’s businesses and be in line with the are to ensure that: targeted risk profile. • BCV’s risk exposure is evaluated, monitored, and 4. The level of risk taken by BCV is in keeping with its risk reported in a manner that is appropriate to the tolerance with regard to net profit fluctuations and the economic and regulatory environment; targeted level of share capital. • BCV’s risk-taking capacity is in line with its risk profile; 5. BCV takes and maintains positions only when it knows • BCV earns optimal returns on the risks that it takes and the risks and is able to manage them. hence on the equity capital committed. 6. BCV assesses and monitors all risks for their potential financial impact (decreases in profit and/or capital), regulatory impact (that could lead to restrictions on the right to conduct business), and impact on the Bank’s reputation. 7. The same definitions, methodological approaches, and organizational principles are applied in managing risk bank-wide. 8. BCV continually refines its methods and its risk- assessment and monitoring processes, selecting the most appropriate approach for each set of risks taken. 9. BCV fosters a culture of risk management and aims to be highly skilled in this field. The Bank follows industry best practices and the recommendations of the Basel Committee. 10. BCV strives for full in-house expertise in all the risk- management models and tools that it uses.
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1.3 Classification of risks 1.4 Governance
BCV monitors four categories of risk in all of its activities: All risks in all areas of the Bank are managed according to • Strategic and business risk, which arises from economic the same basic principles of governance and organization. or regulatory changes that could have an adverse effect The main responsibilities in the area of risk management on the Bank’s strategic choices in the case of strategic may be summarized as follows: risk, or from competitive changes that could have an • The Board of Directors establishes BCV’s fundamental adverse effect on business decisions for a given strategy risk-management principles and decides the strategy it in the case of business risk. will pursue in taking on risk. • Credit risk, which arises from the possibility that a • The Audit and Risk Committee ensures that risk counterparty may default. Credit risk exists before and management at BCV is implemented and operational, as during the unwinding of a transaction. decided by the Board of Directors. • Market risk, which arises from potential adverse changes • The Executive Board is responsible for ensuring that in market parameters, particularly prices, implied risk-management procedures are implemented and volatility, and other market base effects (e.g., correlation operational, and for monitoring the Bank’s risk profile. between asset prices and market liquidity). Liquidity risk, It monitors strategic and business risk and supervises both in terms of possible difficulties with the structural the Executive Board Risk Management Committee in funding of activities and potential problems with short- monitoring and reporting these risks. The committee is term liquidity management, is also deemed to be a chaired by the Chief Financial Officer (CFO) and includes component of market risk. the CEO, other division heads, and the head of the Risk • Operational risk, which arises from a possible Management Department. inadequacy or failure relating to processes, people and/ • Division heads are responsible for conducting and or information systems within and outside the Bank. monitoring the activities of their divisions, regardless Operational risk includes the risk of non-compliance, of whether the division has a front-line, steering, or i.e., the risk of the Bank breaching legal requirements, business-support role. They have initial responsibility standards, and regulations. for overseeing, identifying, and managing the strategic, business, credit, market, and operational risks arising BCV analyzes and manages these risks on the basis of their from the activities of their divisions. potential impact. Three kinds of impact are considered: • The CFO also assumes the role of Chief Risk Officer. • The financial impact, that is, a decrease in the Bank’s net The CFO, with the support of the Risk Management profit, the book value of its capital, and/or the economic Department, puts forward risk-management policy value of its capital. and strategy, monitors the Bank’s aggregate risk profile, • The regulatory impact, that is, intervention by regulators is responsible for capital adequacy, and helps foster a in the form of inquiries, sanctions, increased monitoring, culture of risk management among staff. Together with or a restriction on banking activities. the Compliance Department, the CFO ensures that due • The reputational impact on the image that the Bank diligence is taken to combat money laundering and projects to the outside world. the financing of terrorism, monitor market abuse, and comply with economic sanctions. • The Credit Management Division, under the Chief Credit Officer (CCO), is responsible for analyzing risk for all types of credit risk assumed by the Bank and, up to the limit of its approval authority (see below), for credit decisions, as well as for monitoring risk exposures on a counterparty basis.
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• The Risk Management Department is responsible 2. Credit risk for developing and continually improving the Bank’s methods and principles for managing credit, market, and Managing credit risk is a core competency at BCV. operational risk; enhancing the Bank’s internal control Each phase of the business of extending credit calls for system; monitoring the Bank’s risk profile; and overseeing particular expertise in managing risk. and executing risk reporting. The Risk Management Department ensures that the Bank’s internal control system • First, the lending decision involves processes and is properly implemented and in keeping with the Bank’s methods for analyzing credit risk that ensure an objective needs; the Department is also in charge of submitting all and factual assessment while still meeting the operational risk reports to the Bank’s governing bodies. Finally, the imperatives of the business. Department is responsible for the overnight monitoring of • Second, outstanding loans are continuously monitored, market risk for BCV’s trading floor. not just on an individual basis but also at the level of the • The Compliance Department is responsible for loan portfolio as a whole. This approach allows the credit- establishing the internal regulations and control system risk profile to be monitored to ensure that it remains needed to combat money laundering and the financing consistent with strategic objectives, and makes early of terrorism, monitor market abuse, and comply with detection of increases in risk possible. economic sanctions. The Department is actively involved in • Third, impaired loans are managed differently, following raising employees’ awareness of the respective obligations clearly defined procedures which are designed to assist and carries out independent checks to ensure that internal the debtor in distress as much as possible and thereby regulations are in line with the Bank’s activities. protect the interests of the Bank, as well as those of its • The Security Department is responsible for setting up, depositors, creditors, and shareholders. implementing, and monitoring a control system that keeps the Bank’s operations, IT systems, and data secure, and The three phases of customer credit activities are described the people, infrastructure, and assets within the Bank safe in more detail below. and secure. It also makes sure that measures put in place to manage crisis situations and ensure business continuity remain effective and adequate over time.
BCV risk profile
31/12/16 31/12/17 31/12/18 31/12/19 BCV Group capital adequacy1 • Risk-weighted assets (CHF billions) 17.6 18.2 18.4 18.8 • Total capital ratio 17.6% 17.3% 17.2% 17.3% • Tier 1 capital ratio 17.5% 17.1% 17.1% 17.1% Non-impaired loans (parent company) • Customer loans, on and off balance sheet2 (CHF billions) 31.2 31.8 33.3 33.9 • Expected loss ratio (relative to amount drawn) 14 bps 13 bps 13 bps 13 bps
Impaired loans (parent company) • Impaired loans3 (CHF billions) 0.2 0.2 0.2 0.2 • As a % of total customer loans and due from banks 0.6% 0.6% 0.6% 0.5% • Specific provisioning ratio 39% 46% 42% 45%
Market risk in the trading book • Trading Dept.: VaR4 (CHF millions, 1-day, 99%) 0.3 0.2 0.2 0.2 (parent company) • Asset mgt. nostro portfolio: VaR4 (CHF millions, 180-day, 99%) 0.9 0.7 0.1 0.1 Market risk in the banking book • Sensitivity of capital to a 100-bp rise in interest –353.9 –347.5 –390.4 –396.3 (parent company) rates (CHF millions) Operational risk (parent company) • New provisions and direct losses (CHF millions) 5 2.7 0.8 1.0 0.6
1) Determined according to Basel III since 2013 4) Average VaR for the year 2) Excluding financial investments (bonds) 5) Including gains and changes in provisions 3) Net commitments (commitments to impaired borrowers for which the provision is above 0)
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2.1 The lending decision Analysis of default risk Assessing a counterparty’s default risk is the centerpiece Risk strategy and credit policy of credit-risk analysis. Each counterparty is assigned an Loans to customers represent the Bank’s largest asset internal default rating that reflects its probability of default. position. BCV takes on credit risk with the aim of building The Bank applies seven main ratings, which are divided a high-quality loan portfolio. Its customer credit risk into a further 16 clearly defined sub-ratings. Default- stems primarily from mortgage loans to individuals and risk assessment consists of applying a rating model and businesses, as well as other types of business loans. For supplementing this evaluation with analysts’ assessments, each of the various customer segments, the Bank sets limits which are based on established guidelines and criteria. in terms of maximum exposure, types of credit services Different rating models are used for counterparties with offered, and targeted average quality expressed in terms of different characteristics, but the choice of rating model for expected loss and required capital. Credit risk exposure to a particular counterparty is governed by strictly defined other banks arises mainly from treasury management, from considerations. Barring a few exceptions, the rating models BCV’s trading activities in over-the-counter derivatives, that the Bank uses meet the requirements of the Basel from securities and payment transactions (settlement), and III Accord for Internal Ratings-Based (IRB) approaches. from bank guarantees on trade-finance operations. The The models are under the responsibility of the Risk Bank reviews the limits applicable to each counterparty Management Department and are subject to independent at least once a year. The risk strategy and credit policy are validation and continuous improvement. reviewed regularly. Analysis of collateral Separation of powers and lending authority For any loan, the calculated loan-to-value ratio and Sales (i.e., front-office) functions are kept strictly separate expected loss given default depend directly on the from credit analysis and approval functions. Employees in valuation of the collateral. Collateral is valued according front-office departments are responsible for developing to current market conditions and the assessments of real- customer relationships, and promoting and pricing estate experts. The valuation is reviewed at predetermined loan products, whereas the Finance & Risks Division is intervals and whenever certain clearly defined events responsible for managing relationships with and credit occur. The Bank determines the value of real estate in limits for financial institutions. accordance with the recommendations of the Swiss Bankers Association. Single-family homes are valued using Credit analysis and approval, along with the monitoring of a hedonic method. Multi-unit residential and commercial credit limits, are the domain of the Credit Management properties are valued on the basis of their revenue yield. Division, headed by the CCO. Analysis of credit risk is When a loan is granted, the loan-to-value ratio and based on tools (rating models) developed by the Risk expected loss given default are established on the basis of Management Department, and on assessments by credit the current value of the collateral. The Bank applies loan- analysts. Some low-risk forms of lending, such as standard to-value criteria that are in line with common practice in mortgage loans, are approved on the basis of standardized the Swiss banking industry. criteria through an automated credit analysis, using scores obtained from rating models defined by the Risk Expected loss and risk-adjusted pricing Management Department. For all loan products, interest rates are determined individually, taking into account the cost of the loan and Approval limits for lending are based on the amount of the Bank’s ROE objectives. The cost of the loan includes the loan and the level of expected loss. Depending on the funding or replacement cost, the administrative cost, the magnitudes of these two factors, a loan may require and the expected loss. Expected loss is determined as the approval of an analyst, a sector credit committee, the a function of the counterparty’s probability of default CCO, the Executive Board Credit Committee or the Board (i.e., its internal counterparty default rating) and the loss of Directors. Approval limits are specified in the Bank’s given default. The loss given default depends in turn on lending policy rule book, which is validated by the Board the amount exposed to credit risk and the value of the of Directors. collateral.
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In trade finance, expected loss is calculated for each transaction has been developed using criteria which, for business in accordance with a model based on the Basel III slotting borrowers, take into account the possibility of successful criteria. This approach enables the Bank to price all loans in a turnaround as well as the borrower’s willingness to way that best reflects the quality of each transaction. collaborate actively with the Bank.
Collateral management Provisioning BCV has entered into collateral management agreements The Bank establishes specific provisions for each impaired with most of its bank counterparties, covering all its trading loan. The need for provisions is determined individually for activities in over-the-counter derivatives. These agreements each impaired loan based on an analysis performed according significantly reduce the Bank’s exposure to credit risk. to a clearly defined procedure. In this analysis, collateral is taken at its liquidation value. This is the net amount that the Bank 2.2 Credit monitoring could expect to obtain by liquidating the collateral at current market conditions, after deducting the expenses of realizing Monitoring the transaction and any costs of owning the collateral. The A system of alerts and internal renewal reviews is used to liquidation value is obtained by applying a haircut. detect individual situations in which risk has increased. The system of alerts is based on close monitoring of 2.4 Exposure to credit risk exceeded limits and on other factors (including automatic re-ratings) that may indicate situations of increased risk or The parent company’s total credit-risk exposure amounted to even impairment. Whenever instances of exceeded limits CHF 36.1bn at 31 December 2019, a year-on-year increase of are detected, specific actions are taken by BCV’s credit 0.7%. At CHF 2.0bn, bank-counterparty lending represented advisors and analysts. The system of internal renewal reviews 5% of total credit-risk exposure. sets a maximum time interval between credit analyses for positions of a given size and for counterparties for which no For non-bank-counterparty lending, the Bank’s business is intervention has been required because no alert has been largely with customers located in Vaud Canton and accounts triggered. This time interval is set according to the nature of for 80% of this type of lending. BCV’s corporate loan book the credit and the type of counterparty. reflects the economic structure of the Canton, albeit with a somewhat larger exposure to real estate and construction Analyzing the loan portfolio (43%). The risk profile of the loan portfolio is reviewed quarterly. For each customer segment, credit-risk exposures, risk- The 2019 breakdown by sector was generally stable weighted assets, expected loss (amount and rate), compared with 2018. Retail and private banking clients provisioned commitments, value adjustments, and risk remained the largest sector in total non-impaired loan-book concentration indicators are analyzed and compared with exposures, at 51% at end-2019. prior years. Changes in the exposures on specific portfolios are also analyzed. The results of these analyses are reported The low expected-loss ratio and impaired-loan level attest to to management. Every year, the Bank evaluates the the quality of the Bank’s loan book. The expected loss ratio potential impact of adverse economic scenarios in order on drawn loans reflects counterparty quality, the degree of to assess its capital adequacy. This type of evaluation is credit coverage and the amount of undrawn limits. For non- also applied to specific loan portfolios so as to better impaired customer loans as a whole, the expected loss ratio understand their risk profiles. was 13 basis points, or 10 basis points excluding trade-finance exposures. Impaired loans were CHF 183m and represented 2.3 Managing impaired loans 0.5% of total exposures.
Credit recovery management policies The Basel III Pillar 3 Report, available on the BCV Investor Impaired loans are managed by the Credit Recovery Relations iPad app and the Bank’s website, www.bcv.ch, Management Department within the Credit Management contains more detailed information on the risk profile of the Division. Each case is handled according to a strategy that Bank’s loan portfolio.
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Customer loans and amounts due from banks Customer loans by segment CHF billions, on and o balance sheet, for the parent company1 as a % of total non-impaired customer loan exposure, for the parent company1 35.8 36.1 33.7 34.2 2.3 2.0 Due from banks 2.3 2.2 54% 53% 51% 51%
Non-impaired 31.2 31.8 33.3 33.9 customer loans 18% 17% 18% 18%
20% 21% 21% 23%
Impaired 3% 3% 3% 3% customer loans 0.2 0.2 0.2 0.2 6% 6% 7% 6% Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 16 Dec. 17 Dec. 18 Dec. 19 1) Excluding financial investments Retail and Private Banking Public-sector entities Corporates Trade Finance Real-estate professionals Customer loans by geographical zone 1) Excluding financial investments as a % of on-balance-sheet customer loan exposure, for the parent company1 Client domicile 31/12/2018 31/12/2019 Vaud Canton 80% 80% Rest of Switzerland 13% 15% European Union 2% 1% + North America Other 5% 4%
1 Excluding financial investments
Corporate loans by economic sector 3. Market risk as a % of on-balance-sheet corporate loan exposure, for the parent company,1 at 31 December 2019 BCV takes on market risk in conducting its trading activities Sector and also in managing its interest-rate risk on the banking book. With appropriate risk management, the Bank can Real estate and construction 43% expect to earn a return commensurate with the risk that Retail 12% it takes. Healthcare and welfare 9% Arts & culture and miscellaneous services 8% 3.1 Market risk on the trading book Transport, communication, mining, and energy 6% Finance 5% All trading activities are managed by the Trading Department Government administration and IT 5% within the Asset Management & Trading Division. The Manufacturing 5% Trading Department carries out market transactions Primary sector 3% primarily in equities, fixed-income instruments, forex, and precious metals on behalf of clients. It has also acquired Hotels and restaurants 2% expertise in structured products. The Trading Department Teaching, research, and development 1% is active along the entire structured product value chain, Other 1% from issuing to market-making. 1) Excluding financial investments
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Expected loss rate Limits have been established for each of the metrics expressed in basis points of drawn customer loans, currently in use. Limit utilization is monitored and reported including OTC derivatives, at 31 December 2019 daily by the Market Risk Unit. Customer segments Throughout 2019, VaR for the trading book remained low, Public-sector entities 1 at an average of around CHF 0.2m. Retail and Private Banking 5 3.2 Market risk on the banking book Real-estate professionals 6 The main components of market risk on the banking book are interest-rate risk and liquidity risk. Corporates 32 All customers 3.2.1 Interest-rate risk on the banking book except Trade 10 Finance Exposure to interest-rate risk on the banking book arises Trade Finance 60 from differences between the size and term maturities of assets and liabilities. Movements in the yield curve and All customers 13 changes in customer behavior give rise to interest-rate risk, which has a direct effect on the Bank’s interest income and the economic value of its equity capital.
The strategy and limits for interest-rate risk are defined by the Executive Board’s Asset and Liability Management Committee (ALCO) and then approved by the Board of All new products and instruments issued by the Asset Directors. The ALM and Financial Management (ALM-FM) Management & Trading Division are validated by the Department of the Finance & Risks Division is responsible Division’s Product and Instrument Committee (PIC), which for operational management of interest-rate risk on the is chaired by the Executive Board member in charge of banking book. the Asset Management & Trading Division and includes the Division’s department heads, the head of the Risk Here, the goal is to control the interest margin and the Management Department and the head of the Back Office duration of equity. Department. This process ensures that before a product is launched, all requirements in the areas of risk management, Exposure to interest-rate risk is measured in terms of equity ALM, treasury management, back offices, legal, compliance, duration, yield-curve sensitivity of the economic value of and IT have been met. equity capital, and loss of interest margin under interest- rate and client-behavior stress scenarios. For all trading positions, overnight monitoring of market risk is under the responsibility of the Market Risk Unit 3.2.2 Liquidity risk on the banking book within the Finance & Risks Division’s Risk Management Department. This ensures that control of market risk is Exposure to liquidity risk arises from the Bank’s obligation performed independently of the Asset Management & to honor its commitments to its clients and counterparties, Trading Division. The Market Risk Unit uses the following meet regulatory requirements, and ensure that it can risk control metrics in particular: continue funding its activities. Liquidity risk is addressed • Historical overnight value-at-risk (VaR) with a one-day through short-term liquidity management and long- time horizon and a confidence level of 99% term funding management. BCV’s strategy is to minimize • Analysis of potential losses using static stress tests liquidity risk using these two dimensions. The Bank limits • Sensitivity metrics such as delta, gamma, vega, theta, its exposure to liquidity risk by ensuring that it has a sound and rho. balance sheet, including a liquidity reserve to cover the
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VaR in the trading portfolio (1-day, 99%) risks. It is designed to mitigate operational risk factors by identifying areas for improvement and strengthening the in CHF millions Bank’s operational and management control systems. 1.5 Operational risk factors are grouped into categories; 1.2 each factor represents a potential threat to the Bank’s operations. The factors are the following: 0.9 • Erroneous or malicious actions taken by employees, suppliers, bank counterparties, customers, or other 0.6 parties external to the Bank • Inadequacies of information systems, infrastructure, and/ or the Bank’s organization 0.3 • External factors such as the risks of natural disasters, pandemics, and social unrest. 0.0 2014 2015 2016 2017 2018 2019 Operational risk factors can give rise to risk events. The Bank categorizes potential risk events as follows: • Internal and external fraud, including cybercrime • Events related to human resources impact of a major liquidity outflow, as well as a sustainable • Events linked to customer relations and business and diversified long-term funding structure so that it can practices, including money laundering and the financing expand its activities. This involves maintaining the safety of terrorism, market abuse, and non-compliance with margins set by the Board of Directors relative to regulatory economic sanctions requirements and balance sheet ratios. • Loss of operating resources • Failure of information systems The framework for liquidity management is drawn up by • Events related to transaction and process management. the Executive Board’s ALCO and approved by the Board of Directors. The ALM-FM Department, which includes Reviews are carried out periodically to identify the main the Bank’s treasury management team, is responsible for operational risks. These are supplemented by ad-hoc operational management of long-term funding and short- reviews, for instance if a potential new threat emerges, term liquidity. if FINMA submits a specific request, or if a major risk materializes at another bank. These reviews and analyses Exposure to liquidity risk is calculated using a broad are conducted by Management and by functional skills spectrum of indicators, including components of the centers (e.g., the Compliance and Security departments) liquidity reserve, market indicators, regulatory ratios, and with support from the Operational Risk function within simulations of funding needs based on several scenarios. the Risk Management Department. The aim of the reviews is to reveal possible improvements to the Bank’s 4. Operational risk risk-management system, and particularly to operational and managerial controls. The Bank takes a comprehensive approach to managing operational risk in general, and compliance risk and In addition to identifying risks, the Bank exhaustively and physical and IT security risk in particular. systematically gathers information on and analyzes the main operational events arising from the Bank’s activities. 4.1 Operational risk These events are recorded in a dedicated operational- risk-management application and analyzed on a monthly The Bank’s operational-risk management concept is based basis. In order to monitor the Bank’s operational-risk on the Basel Committee’s principles of best practice and profile, tolerance limits are set for operational events in is in keeping with FINMA Circular 2008/21 on operational general and for each category of event.
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If an important operational-risk event occurs, the Bank 4.3 Physical and IT security risk bases its response on clearly defined incident management measures, such as the Business Continuity Plan (BCP). To manage security risk, the Bank protects its IT systems, data, transactions, people (especially clients and 4.2 Compliance risk employees), infrastructure (buildings and equipment), and physical assets (e.g., banknotes, precious metals, paper The management of compliance risk consists of having contracts, and mortgage deeds) from potential damage, suitable processes and systems in place for combating and takes steps to mitigate the impact of a crisis or serious money laundering, the financing of terrorism, monitoring incident. market abuse, and ensuring compliance with economic sanctions. The Bank has introduced a range of security measures to protect its IT systems, data, and operations based on To combat money laundering and the financing an analysis of threats, particularly regarding cybercrime. of terrorism, the Bank carefully monitors its client Because the methods used by cybercriminals are changing relationships and its transactions with clients. Each client constantly, the Bank regularly upgrades these measures relationship is categorized based on its size and importance and regularly tests its capacity to withstand cyberattacks. and in accordance with money-laundering and terrorist- The Bank works closely with specialized partner firms financing risk factors, as evaluated by an expert-based and Swiss government agencies in charge of combating model. These categories are then used to determine the cybercrime, such as the Reporting and Analysis Centre level of monitoring and the decision-making authority for Information Assurance (MELANI). The Bank’s business applied to each client relationship. Client transactions continuity plans are also tested at regular intervals. are also monitored based on their size and in accordance with money-laundering and terrorist-financing risk factors, The Bank has also implemented a series of measures pursuant to the Swiss Federal Anti-Money-Laundering to keep its people, infrastructure, and assets safe and Act (AMLA): The Bank’s front-line businesses take initial secure. These measures are based on an analysis of responsibility for identifying money-laundering and potential risk events, such as a loss of operating resources, terrorist-financing risks relating to both client relationships theft, and accidents resulting in physical injury. These and transactions. The Compliance Department provides measures include restricting access to certain areas of the support and constant oversight. Bank’s premises and keeping buildings under constant surveillance. To limit the risk of accidents, the Bank applies Monitoring market abuse involves identifying instances the Swiss government’s directives on workplace health, of insider trading and market manipulation. Trades by safety, and prevention. It takes steps to raise employees’ clients and employees are monitored to detect any awareness and trains first aiders at its main sites. Finally, the atypical returns and possible access to insider information, Bank has business continuity plans to cover, for example, a in keeping with FINMA Circular 2013/8. The Bank also pandemic or other disaster. monitors trades in order to detect behavior that could constitute market manipulation. More specifically, to combat fraud, the Bank has measures in place to prevent fraudulent behavior, detect fraud, Ensuring compliance with economic sanctions is an and even identify fraudsters. Since fraudsters often target important obligation for the Bank. To the best of its clients’ IT equipment and communication channels, knowledge, the Bank complies with the various sanction the Bank regularly conducts campaigns to raise clients’ regimes that it is subject to, the most important of which awareness of issues such as data piracy. are the Swiss sanctions imposed by the State Secretariat for Economic Affairs (SECO), the US sanctions imposed by the Office of Foreign Assets Control (OFAC), and the European Union’s sanctions. This mainly involves sanctions against countries or specific economic sectors, or sanctions intended to freeze individuals’ or companies’ assets.
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Internal control system (ICS)
The Bank’s internal control system (ICS) was developed forms and other documents to be used. The overall risk- in accordance with the recommendations of the management framework therefore touches upon all Committee of Sponsoring Organizations of the Treadway aspects of the Bank’s operations. Commission (COSO) and the Basel Committee, and pursuant to FINMA Circulars 2017/1 on corporate The operational ICS ensures that managers and other governance and 2008/21 on operational risk. The purpose employees comply with the operational-risk aspects of the of the ICS is to ensure that the Bank’s activities are in overall risk-management framework. The operational ICS line with its overall objectives. More specifically, the ICS comprises three levels. The Executive Board is responsible enables the Bank to: for the first two levels, while the Board of Directors oversees the third level: • Achieve its performance objectives both in terms of profit and controlling profit fluctuations • Level one: operational oversight by employees and managerial oversight by their supervisors • Provide reliable information both internally and externally • Level two: controlling the appropriateness and • Comply with legal, regulatory and self-regulatory effectiveness of level-one oversight by entities requirements. independent of the chain of command
The Bank has an overall ICS along with an operational ICS. • Level three: a periodic review of levels one and two by the Internal Audit Department. The overall ICS is designed to ensure that the Bank’s risk appetite is in keeping with its risk-taking capacity and that The operational ICS is assessed annually by the Bank’s the overall risk-management framework appropriately governing bodies based on a review overseen by the addresses the risks identified. It comprises a set of measures Risk Management Department, with help from other and procedures that structure the Bank’s operations and the departments such as Compliance. The aim of the review is orientation of its business. They include: robust governance to verify that the operational ICS fulfills its purpose and is mechanisms; a clearly defined organizational structure; properly implemented. It comprises: coherent business goals that will ensure the Bank’s longevity; established operating procedures for the Executive Board, • Checks to ensure that operational and managerial the Board of Directors, and their committees; regular controls are in line with the Bank’s operations. These reviews of the Bank’s overall and business-specific strategies, checks are conducted through workshops run by financial strategy, and risk policy (including key risk limits); department heads (level-one oversight) with support and reports that are in line with the Bank’s business activities from the Operational Risk Unit within the Risk and risk-management framework. Management Department (level-two oversight).
The Bank’s governing bodies also assess the overall ICS using • Monitoring of operational controls through an in particular two analyses that are conducted each year by application that all managers use to check the the Risk Management Department. The first analysis is an managerial controls conducted by their subordinates overall stress test to check the Bank’s capital adequacy, and to carry out their own controls. These controls are while the second evaluates the risk-management system conducted by managers at all levels and recorded in full to ensure that it is capable of addressing the Bank’s main in the application. risks, taking into consideration the financial, reputational, and regulatory impacts. • Independent reviews of controls (level-two oversight) by functional skills centers, including the Risk Management, Implementing an overall risk-management framework Compliance, Security, Financial Accounting, and Human involves assigning tasks, responsibilities, and decision- Resources departments. These reviews, which complement making authority to employees, and setting out the limits, the managerial controls, ensure that requirements have deadlines, procedures, and rules to be followed and the been properly understood and implemented.
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Corporate Governance
General principles 70 General principles
1. Group structure and shareholders 71 BCV is aware of its responsibilities and meets corporate governance requirements. It strives to: 2. Capital structure 72 • Communicate transparently. The information provided 3. Board of Directors 74 in this chapter complies with the information-disclosure requirements contained in the Corporate Governance 4. Executive Board 85 Directive issued by the SIX Swiss Exchange.1
5. Compensation, shareholdings, and loans 92 • Apply the principal standards of corporate governance. BCV follows the recommendations contained in the 6. Shareholders’ rights 97 Swiss Code of Best Practice for Corporate Governance² whenever they are compatible with its status as a 7. Takeovers and defense measures 99 corporation organized under public law.
8. Auditors 99 • Carry out regular reviews of its organization with regard to the Bank’s present needs and future growth, and 9. Disclosure policy 100 ensure that all members of management are involved in its operational procedures. 10. Contacts 101 • Materially and continuously improve the information it publishes, in particular by means of its annual report and Basel III Pillar 3 report, as well as a sustainability report that will be published annually as of this year.
This chapter explains how the Bank puts these principles into practice. Additional information can be found in the Articles of Incorporation (i) and the Cantonal Act of 20 June 1995 Governing the Organization of Banque Cantonale Vaudoise (“LBCV”) (ii), both of which are available on the BCV website.3
1) See the English translation of this text on the SIX website: https://www. six-exchange-regulation.com/dam/downloads/regulation/admission-manual/ directives/06_16-DCG_en.pdf 2) An English translation of this text, by Prof. Peter Böckli, may be found at www.economiesuisse.ch 3) See page 101 for the links to these documents
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As a public-sector entity within the meaning of Article 763, 1. Group structure and shareholders paragraph 2, of the Swiss Code of Obligations, BCV is not subject to the Ordinance against Excessive Compensation 1.1 Group structure in Publicly Listed Companies (ORAb), which went into effect on 1 January 2014. Nevertheless, in the interest of 1.1.1 Group operational structure (at 31 December good governance and given that BCV is publicly listed on 2019) the SIX Swiss Exchange, the Board of Directors decided to incorporate the principles of the ORAb into the Articles Details of all BCV Group companies are shown in note of Incorporation(i) insofar as they were compatible with 10.7 (consolidated and non-consolidated holdings) to the BCV’s specific status and without amending the LBCV(ii). consolidated financial statements, on page 133. BCV is the These changes were approved at the Shareholders’ Meeting only listed company in the Group’s scope of consolidation. held on 1 May 2014. Although the ORAb provisions on the election and term of office of members of the Board 1.1.2 Listed companies included in the scope of of Directors were not incorporated into the Articles of consolidation Incorporation (i), many others were adopted. These include the principles regarding the Independent Proxy (Article 18a Company name Banque Cantonale Vaudoise of the Articles of Incorporation (i)); electronic voting (Article Legal status Corporation organized under 18a, paragraph 5, of the Articles of Incorporation (i)); the public law, established on 19 maximum number of board positions outside BCV that may December 1845 by Council Decree be held by members of the Board of Directors (Article 23 of the Vaud Cantonal Parliament (Grand Conseil vaudois) and of the Articles of Incorporation (i)) and the Executive Board governed by the Act(ii) of 20 June (Article 29 of the Articles of Incorporation(i)); the duties 1995, as amended on 25 June 2002, of the Compensation, Promotions and Appointments 30 January 2007, and 2 March 2010 Committee (Article 30a of the Articles of Incorporation(i)); the length of the employment contracts of the members Registered office Place Saint-François 14, 1003 Lausanne, Switzerland of the Executive Board (Article 28, paragraph 2, of the Articles of Incorporation(i)); the compensation structure Stock exchange listing BCV shares are listed on the SIX Swiss Exchange (Article 30b of the Articles of Incorporation(i)); the approval of compensation (Article 30c of the Articles of Market capitalization At 31 December 2019, the value of BCV’s listed shares with a par Incorporation(i)); and unauthorized compensation (Article value of CHF 10 was CHF 6.8bn 30d of the Articles of Incorporation(i)). In addition, as BCV is not subject to the ORAb, it is required to continue providing Security number 1.525.171 compensation reports in the form of a section of its annual ISIN code CH0015251710 report (Article 30e of the Articles of Incorporation(i)). 1.1.3 Unlisted companies included in the scope of consolidation (at 31 December 2019)
The parent company’s Board of Directors and Executive Board also serve as the Board of Directors and Executive Board of the Group, which is not a holding company. Furthermore, relations between the Bank and its subsidiaries are governed by a Group directive.
At the operational level, each of the subsidiaries reports to a BCV division according to the type of business in which it engages.
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In principle, each head of division is also a member and/or 2.2 Authorized and conditional capital chair of the board of directors of each subsidiary attached to his or her division. There was no authorized or conditional capital at 31 December 2019. The share capital of BCV’s subsidiaries and the holdings of the parent company are shown in note 10.7 on page 133 of 2.3 Capital structure at the end of the 2017, 2018, and 2019 the consolidated financial statements. financial years
1.2 Major shareholders There were no changes in the capital structure over the past three financial years. At 1 January 2019, the Canton of Vaud held 66.95% of the Bank’s share capital. No other shareholder is known Number of shares to hold an interest of 3% or more in either the voting rights or capital. BCV Group is currently unaware of any Share capital 31/12/2017 31/12/2018 31/12/2019 shareholders’ pacts. Registered shareholders other than the Canton of Vaud represented 22.88% of the Group’s capital Share capital (fully paid-in at 31 December 2019. registered 8,606,190 8,606,190 8,606,190 shares) 1.3 Cross-shareholdings
There are no cross-shareholdings between the Bank and any other company which exceed the limit of 5% of either Equity – Group the voting rights or capital. CHF millions
2. Capital structure Equity 31/12/2017 31/12/2018 31/12/2019 Share capital Share capital CHF 86,061,900 (fully paid-in) 86 86 86 (registered shares) Capital reserves Authorized capital None and retained 2,670 2,735 2,799 Conditional capital None earnings Employee stock options None Reserves for general banking 701 701 701 risks 2.1 Share capital Minority interests in Information on the Bank’s share capital and changes in 2017, shareholders’ 0 0 0 2018, and 2019 may be found in notes 3 and 5.12 to the equity parent company financial statements (pages 167 and 175). Additional information on the Group’s capital is shown on Total 3,457 3,522 3,586 page 115 of the consolidated financial statements.
At 31 December 2019, the Bank’s share capital stood at CHF 86,061,900 and consisted of 8,606,190 registered shares with a par value of CHF 10.
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2.4 Shares and participation certificates c) if and so long as his/her recognition could prevent the Bank from furnishing proof of the shareholder base Registered shares at 31 December 2019 required under Swiss law.
Number of shares 8,606,190 End of excerpt from the Articles of Incorporation. Proposed ordinary dividend CHF 36 Par value CHF 10 2.6.2 Exemptions granted during the financial year Stock exchange listing SIX Swiss Exchange No exemptions were granted during the financial year. Voting rights One voting right per share 2.6.3 Registration of nominees 2.5 Dividend-right certificates The Board of Directors may refuse the registration of an BCV has not issued any dividend-right certificates. acquirer as a shareholder with voting rights unless he/she expressly states, when requested to do so, that he/she has 2.6 Restrictions on transfers and registration purchased the shares in his/her name and for his/her own of nominees account.
The terms governing transfers of registered shares are set 2.6.4 Privileges under the articles and transfer out in Article 13 of BCV’s Articles of Incorporation. restrictions
2.6.1 Restrictions on transfers At any Shareholders’ Meeting convened to vote on the removal of a clause relating to restrictions on the transfer Excerpt from the Articles of Incorporation: of registered shares, such removal shall be decided by an absolute majority of votes attached to the shares Article 13 – Transfers of registered shares represented, where each share shall entitle the holder to The transfer of any registered share and its entry in the one vote (Article 11, paragraphs 3 and 4, of the LBCV(ii)), in share register shall be subject to approval by the Board of compliance with the rules applicable to any resolution of Directors. (…) If the Board of Directors does not reject the the Shareholders’ Meeting. request within twenty days, the acquirer shall be recognized as a shareholder with voting rights. 2.7 Convertible bonds and options
The Board of Directors may refuse to register an acquirer as At 31 December 2019, there were no outstanding a shareholder with voting rights: convertible bonds, warrants, structured products, or OTC options involving the BCV share and issued by BCV. a) in respect of a shareholding exceeding 5% of the Bank’s share capital held by a single shareholder or group of shareholders as defined by the Federal Act on Stock Exchanges and Securities Trading. (…) That limit shall not apply to the Canton of Vaud or any third party to which the Canton of Vaud sells part of its shareholding, or to the takeover of a company or part of a company;
b) if a shareholder does not expressly state, when requested to do so, that he/she has acquired the shares in his/her own name and for his/her own account;
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3. Board of Directors members appointed by the VCG (Mr. Ochsner, Committee Chairman, and Mr. Schwarz) – who therefore hold such 3.1 Members of the Board of Directors appointment letters – and one elected by shareholders (Jack Clemons). The Board members are assigned to the At 31 December 2019, the Board of Directors comprised various committees on the basis of their personal and only non-executive members. The Chairman and members professional abilities and their preferred fields, the aim of the Board perform no other functions within BCV being to protect the interests of the Bank, its shareholders, Group, and have not done so during the past three years, and all of its partners. with the exception of Jean-François Schwarz, who joined the Board of Directors on 1 January 2019. The seven members of the Board of Directors are independent members within the meaning of FINMA The members of the Board of Directors maintain normal Circular 2017/1 “Corporate governance – banks.” Three business relations with BCV and Group companies. members are elected by shareholders and four are appointed by the VCG. Although the four members appointed by the In accordance with Article 12, paragraph 2bis, of the VCG are given appointment letters, they are independent LBCV(ii) and Article 21, paragraph 3, of the Bank’s Articles members in that they receive compensation for any BCV of Incorporation(i), the Vaud Cantonal Government board-related activities from the Bank alone and do not (VCG) gives an appointment letter to the members that it receive any specific instructions from the VCG. appoints to the Board of Directors. The VCG appoints four of the seven members of the Board; its appointees in 2019 were Jacques de Watteville, Fabienne Freymond Cantone, Peter Ochsner, and Jean-François Schwarz (who joined the Board on 1 January 2019). The purpose of the appointment letter is to describe the general framework of the mission entrusted to these members as VCG appointees to the Board and to define the full extent of their relationship with the Canton of Vaud in this regard. It addresses, in particular, the issues of loyally safeguarding the interests of both BCV and the Canton, complying with BCV’s legal mandate, and exercising the VCG’s power to appoint certain members of the Bank’s governing bodies. The letter sets out the various factors that must be considered with respect to the governing bodies’ organization, operation, and composition, as well as BCV’s mission and strategy. Board members are called upon to ensure the implementation of a strategy that will allow the Bank to carry out its mandate under the best possible conditions, while generating a sufficient return to guarantee its financial soundness over the long term, and to contribute to defining objectives that take into account both its mission and its profitability (see also Article 24, paragraph 2, of the Bank’s Articles of Incorporation(i)). It also states what the VCG expects in terms of communication with Vaud Canton, BCV’s shareholders, the financial community, and the public, bearing in mind the information-exchange agreement pursuant to the above Act(ii) and the Bank’s Articles of Incorporation(i) (see in particular Article 24, paragraph 2). The Audit and Risk Committee includes two Board
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Name, year of birth and nationality Education Career experience Jacques Business degree and Chairman of the Board of Directors since 1 January 2018. After serving as de Watteville, doctorate in law from a Delegate of the International Committee of the Red Cross in Lebanon, 1951, Lausanne University, he began his career in diplomacy when he entered the diplomatic service Swiss citizen and member of the of the Swiss Federal Department of Foreign Affairs (FDFA) in 1982. Bar of Vaud Canton Mr. de Watteville served as Switzerland’s official representative to several countries as well as the European Union, and in the late 1990s was named head of the FDFA’s Economic and Financial Affairs Division where he worked on a number of international issues relating to Switzerland’s financial services sector and played an important role in resolving various tax disputes. Mr. de Watteville became State Secretary for International Financial Matters in 2013, and from 2015 until June 2017 led Switzerland’s negotiations with the EU, most notably on matters related to the free movement of persons, tax issues, and bilateral agreements.
Reto Donatsch, Degree in economics Reto Donatsch was elected to the BCV Board of Directors at the Annual 1950, from the University Shareholders’ Meeting on 5 May 2011 and appointed Vice Chairman by Swiss citizen of Geneva the Vaud Cantonal Government on 1 January 2019. He is also Chairman of the Compensation, Promotions and Appointments Committee. After completing his studies and two banking internships, Mr. Donatsch started his career in the wealth management business at Credit Suisse in 1978. He first worked at the head office in Zurich, where he stayed for ten years and reached the rank of Deputy Director. In 1989, he was promoted to Director and head of the Finance Department of Credit Suisse Geneva. He joined Bank Leu AG, Zurich, in 1993 and became CEO in 1996. He also served on the Executive Board of Credit Suisse Private Banking from 1997 to 2001, representing the Group’s independent banks. From 2004 to 2007, he was Vice Chairman of the Board of Directors of Bank Leu AG. Since then, he has served on the boards of several companies and foundations. Mr. Donatsch will be stepping down from the Board of Directors at the Annual Shareholders’ Meeting on 30 April 2020, as he will have reached the age limit of 70 years old set by the Act(ii).
Jack G. N. Clemons, Master’s degree from Mr. Clemons was elected by shareholders at the Annual Shareholders’ 1966, Cambridge University Meeting held on 21 April 2016 and joined the Board of Directors on that Dual Swiss and MBA from date. He started his career in auditing and subsequently became a partner and British citizen INSEAD, France at Deloitte. He then served as Chief Operating and Financial Officer for a pan-European internet group. In 2006, Mr. Clemons joined Lausanne- Fellow of the based Bata, a leading global manufacturer and retailer of footwear, as Chief Institute of Chartered Financial Officer; he was later appointed Chief Executive Officer, a position Accountants in he held until 2015. Since then, he has served on the boards of several England & Wales companies and foundations.
Ingrid Deltenre, Degree in humanities Ingrid Deltenre was elected at the Annual Shareholders’ Meeting on 1 May 1960, from the University 2014 and joined the Board on that date. After graduating from the University Dual Swiss of Zurich of Zurich with a humanities degree, Ms. Deltenre held various executive and Dutch citizen positions in publishing before becoming CEO of Publisuisse in 2000. She was appointed to head up Schweizer Fernsehen (SF), the leading public TV broadcaster in German-speaking Switzerland, in 2004, and held this position for six years. From 2010 until 2017, Ms. Deltenre was Director General of the Geneva-based European Broadcasting Union (EBU), an organization with close to 400 employees.
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Fabienne Master’s degree Fabienne Freymond Cantone was appointed to the Board by the Vaud Freymond Cantone, in economics with Cantonal Government, taking up her position on 26 April 2018. 1963, a specialization in Ms. Freymond Cantone began her professional career at Arthur Andersen Dual Swiss political economy and then worked at Banca della Svizzera Italiana. She served on and and Italian citizen from the University subsequently presided the finance committee of the Nyon municipal of Geneva legislature from 1998 to 2006 and then served as head of finance in the Nyon municipal government from 2006 to 2011. Ms. Freymond Cantone was a member of the Vaud Cantonal Parliament from 2002 to 2018. She served on its finance committee until 2012 and became chair of the parliament’s control committee in 2017.
Peter Ochsner, Degree in business Mr. Ochsner was appointed by the Vaud Cantonal Government and joined 1956, economics from the Board on 1 July 2016. He also became Chairman of the Audit and Risk Swiss citizen ESCEA Management Committee on that date. Mr. Ochsner joined PricewaterhouseCoopers School, Zurich S.A. in 1982 after gaining experience in the Internal Audit & Organization Department of the Swiss National Bank. He served on PwC’s management Swiss-Certified board, and headed the firm’s auditing practice in Switzerland from 2006 Accountant to 2014. Mr. Ochsner is a Swiss-Certified Accountant and, while at PwC, was a lead bank auditor. He has extensive experience with clients in the banking and insurance industries, both in Switzerland and internationally. Mr. Ochsner retired from PwC in 2014.
Jean-François Master’s degree Mr. Schwarz, who has over 40 years of experience in the banking sector, Schwarz, in economics with was appointed by the Vaud Cantonal Government, taking up his position 1955, a specialization on 1 January 2019. He began his career at BCV in 1976 in corporate lending. Swiss citizen in business From 1986 to 2003, he worked for Credit Suisse in Lausanne, New York, administration from Zurich, and Geneva, where he took on important roles in the bank’s Lausanne University lending and SME businesses. In 2003, he returned to BCV as a member of the Executive Board with responsibility for the Corporate Banking Division, which comprises the SME, Large Corporates, and Trade Finance departments. He retired from the Executive Board in June 2017.
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3.2 Other activities and business relations (at 31 December 2019)
Jacques de • Member of the Board of the BCV Foundation, Lausanne Watteville • Member of the Board of Fondation Leenaards, Lausanne • Member of the Executive Council and Vice President of the Jean Monnet Foundation for Europe, Lausanne • Member of the Board of Directors of S.I. Le Schuss Villars SA, Villars-sur-Ollon Reto Donatsch • Member of the Board of Directors of Constellation Capital AG, Freienbach • Member of the Investment Committee of the Bern Canton Pension Fund, Bern • Board member of the Swiss Red Cross Humanitarian Foundation, Bern • Member of the Adjunct Faculty of the Swiss Finance Institute Jack G. N. Clemons • Fellow of the Institute of Chartered Accountants in England and Wales • Member of the International Board and Chair of the Audit Committee of the World Wide Fund for Nature (WWF), Gland • Member of the Board of Directors of DKSH Holding AG, Zurich Ingrid Deltenre • Member of the Board of Directors of Givaudan SA, Vernier • Member of the Board of Directors of Sunrise SA, Glattpark (Opfikon) • Member of the Board of Directors of Agence France-Presse, Paris • Member of the University of Zurich’s Executive MBA advisory board • Member of Aufsichtsrat Deutsche Post/DHL, Bonn Fabienne Freymond • Member of the Nyon municipal government Cantone • Chair of the following boards of directors: Téléréseau de la Région nyonnaise (TRN SA), Nyon; and Canal Saturne SA, Nyon • Committee member of the following associations: Association Pro-jet, Association of the Friends of the Museums of Nyon (AMN), Association de la Fête de la Musique de Nyon, Nyon Région Tourisme, and Association pour la Fête de la Vigne, all of which are based in Nyon; and Association intercommunale pour l’exploitation d’un couvert régional à plaquettes et bois énergie, Trélex • Member of the following foundation boards: Fondation pour les Arts et la Culture, Conservatoire de l’Ouest vaudois, Fondation pour le Musée du Léman, Fondation pour le développement du Musée romain, Fondation Abraham Hermanjat, Fondation du Midi, and Fondation Guido Comba, all of which are based in Nyon Peter Ochsner • Member of the Board of Directors of Kieger SA, Zurich • Head of Finance and Accounting for the Festival of Zurich Foundation, Zurich • Member of the Board of the Professor Dr. Max Cloëtta Foundation, Zurich Jean-François • Member of the Board of the Fondation pour le Maintien du Patrimoine Aéronautique (FMPA), Schwarz Lausanne
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Jacques de Watteville Chairman of the Board of Directors
Reto Donatsch Vice Chairman of the Board of Directors
Fabienne Freymond Cantone Jack G. N. Clemons Member of the Board of Directors Member of the Board of Directors
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Peter Ochsner Member of the Board of Directors
Ingrid Deltenre Member of the Board of Directors
Jean-François Schwarz Member of the Board of Directors
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3.3 Election and term of office Chairman on 1 January 2018. The current Vice Chairman is Reto Donatsch, who was already a Board member when 3.3.1 Principles he was appointed Vice Chairman. Mr. Donatsch replaced Paul-André Sanglard, who stepped down from the Board of Pursuant to the Articles of Incorporation, the Board of Directors on 31 December 2018 after serving the maximum Directors is composed of seven, nine, or eleven members. term under the LBCV(ii). The other members are Ingrid The Chairman and half of the other members are Deltenre, Fabienne Freymond Cantone, Jack Clemons, appointed by the Vaud Cantonal Government (Article 12, Peter Ochsner, and Jean-François Schwarz (who succeeded paragraph 1, of the LBCV(ii) departs from the ORAb on this Paul-André Sanglard on 1 January 2019). point). The remaining members are elected individually by shareholders at the Annual Shareholders’ Meeting, with Pursuant to the Articles of Incorporation(i) and the by- the Cantonal Government abstaining from voting. laws, the Board of Directors may delegate some of its responsibilities to committees drawn from among its Pursuant to Article 12, paragraph 5, of the LBCV(ii) and in members, except as otherwise provided by law. derogation of the ORAb, the Chairman and other members of the Board of Directors are appointed for a period of four The Board of Directors has set up an Audit and Risk years. Their terms of office may be renewed, but the total Committee and a Compensation, Promotions and term of each member may not exceed 16 years. They are Appointments Committee. In principle, neither committee required to step down at the end of the calendar year in has decision-making powers. Their responsibility is to which they reach the age of 70. prepare Board resolutions and submit opinions. The Board of Directors may create other special committees to deal 3.3.2 First election and term of office with matters that are submitted to the Board.
The table below shows the terms of office of the current 3.4.2 Committees: composition and terms of reference members of the Board. Audit and Risk Committee 3.4 Internal organization In 2019, the Audit and Risk Committee was made up of Peter Ochsner (Chairman), Jack Clemons, and Jean-François 3.4.1 Allocation of tasks Schwarz.
Jacques de Watteville, who was appointed by the Vaud The Audit and Risk Committee is tasked with ensuring the Cantonal Government, joined the Board of Directors as application and operation of risk control and management
Latest possible Members of the Date of first expiration of term Board of Directors Year of birth election of office Appointed by Jacques de Watteville (Chairman) 1951 1 January 2018 2021 Vaud Government Reto Donatsch (Vice Chairman) 1950 5 May 2011 2020 Shareholders’ Meeting1 Jack G. N. Clemons 1966 21 April 2016 2032 Shareholders’ Meeting Ingrid Deltenre 1960 1 May 2014 2030 Shareholders’ Meeting² Fabienne Freymond Cantone 1963 26 April 2018 2033 Vaud Government Peter Ochsner 1956 1 July 2016 2026 Vaud Government Jean-François Schwarz 1955 1 January 2019 2025 Vaud Government 1 Term of office renewed for one year at the 2019 Annual Shareholders’ Meeting 2 Term of office renewed for four years at the 2018 Annual Shareholders’ Meeting
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at BCV. It assists the Board of Directors in assessing the the Committee is responsible for ensuring the quality and various types of risk faced by BCV, and in structuring independence of the work performed by both the internal and organizing the Bank’s risk-management and control and external auditors. It discusses the contents of the processes. It draws up opinions and recommendations parent company’s audit reports, together with those of the for the Board after conducting a critical examination on a subsidiaries, as part of a consolidated review. It also oversees regular or case-by-case basis of the Group’s main risks, the implementation of the auditors’ recommendations. The risk-management policy and strategy, reports on risks, and Committee agrees on the annual and six-year audit plans compliance with regulatory capital requirements. for the internal auditor and is informed of the external auditor’s prudential and financial audit strategy. The Committee reviews the Chief Risk Officer’s report every quarter, and the Bank’s financial data and the reports Apart from its regular duties, the Audit and Risk Committee from the head of Internal Audit, the Chief Compliance attended a one-day training seminar in 2019 that focused Officer and the head of the Legal Department every six on a number of topics related to risks and the evolving months. It has no decision-making authority and submits regulatory landscape. its conclusions to the Board of Directors. Once a year, the Audit and Risk Committee conducts a The Committee supervises the work of both the internal detailed evaluation of the internal (see section 3.6 below) and external auditors. Together with the external and external auditors as well as a self-assessment. auditors’ representative, it examines the external auditors’ recommendations concerning BCV’s organization and Compensation, Promotions and Appointments risk-assessment policy, and gives its opinion on the Committee qualifications of the internal auditors and the cooperation In 2019, the Compensation, Promotions and Appointments of Bank units in audit procedures. The head of Internal Committee, which is expressly provided for in the Articles Audit also briefs the Committee on matters pertaining of Incorporation(i) (Article 30a), consisted of Reto Donatsch to BCV’s organization and operations, and provides a (Chairman), Ingrid Deltenre, and Fabienne Freymond risk analysis. Furthermore, the Committee gives its own Cantone. The Chairman of the Board and the CEO take appraisal of the Internal Audit Department and reviews the part in an advisory capacity. status of litigation involving BCV. The Committee provides significant support to the Board The Committee meets for at least one full day every quarter of Directors, particularly relating to human resources to accomplish its duties, which are set out in detail in an strategy and employee transition management. It helps in Audit and Risk Committee Charter(iii), and to review other defining profiles and selecting and proposing candidates matters related to its activities. An additional meeting is for senior management and board positions. dedicated essentially to the closing of the annual accounts. The Committee, which has no decision-making authority, The head of Internal Audit, representatives of the external thus defines the profile required for the Chairman and the auditor, and the CFO attend all Committee meetings, with other members of the Board of Directors, as well as for exceptions for certain specific subjects. Depending on the the CEO and the other members of the Executive Board. agenda, the meetings are also attended by other members It draws up and prioritizes proposals for the selection and of the Executive Board, the head of the Risk Management hiring of the Bank’s senior executives and examines the Department, the Chief Compliance Officer, the head of Board of Directors’ compensation system. It also prepares Accounting, and the head of the Legal Department. and prioritizes recommendations for the Board of Directors and the Shareholders’ Meeting on decisions concerning the In addition to its risk-related role described above, the compensation of the Chair of the Board of Directors (in his main task of the Audit and Risk Committee is to assist or her absence), the CEO, and the Executive Board members. the Board of Directors in carrying out its supervisory It also makes recommendations to the Board of Directors on duties and ensuring the integrity of the consolidated the compensation of the head of Internal Audit, and on the financial statements and financial reports. Furthermore, Bank’s overall compensation policy and level.
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In addition, it assesses the performance of the CEO and Where necessary, outside specialists are invited to attend reviews the CEO’s assessment report on members of the Board or committee meetings to present a specific topic. Executive Board. The Board of Directors has adopted an operational procedure It makes recommendations on executive appointments for working with the Executive Board, with a subject-by-subject and promotions. description and schedule of the tasks to be performed. This modus operandi, which is periodically reviewed, establishes Finally, the Committee has the additional tasks of handling the frequency with which matters are handled by the two matters related to corporate social responsibility and Boards, including their committees, and in which form. The of preparing and prioritizing recommendations for the objective is good governance by ensuring that all pertinent Board of Directors on decisions concerning rules of good issues are addressed at the right level, that the time available governance, including assignments entrusted to external to the boards and committees is allocated optimally, and that consultants by the governing bodies. their involvement is fully consistent with their responsibilities (see also section 3.6). Since 2009, the Board of Directors has 3.4.3 Operational procedures of the Board of Directors delegated more matters to the committees. Decision-making and its committees authority nevertheless rests with the Board.
In 2019, the Board of Directors held 11 ordinary plenary 3.4.4 Performance appraisal of the Board of Directors meetings. Each meeting generally lasted three-quarters of a day, with the exception of three full-day meetings. The The Board of Directors sets itself annual objectives, taking Board of Directors also went on two 2-day retreats, in part into account the goals set forth in the Articles(i), as well with the Executive Board. The retreats provide the Board of as the Bank’s strategy and risk policy. The Board carries Directors with the opportunity to address strategic topics out an analysis every six months to determine whether in greater depth, including the Bank’s overall strategy and these objectives have been achieved, and also reviews and its strategies in the areas of human resources, finance, IT, improves its procedures on a regular basis. and risk management. Furthermore, the Board meets once a year without the In 2019, the attendance rate for Board meetings was 98%. Chairman to evaluate his or her performance.
The Board committees meet whenever required by the 3.5 Powers business at hand. In 2019, the Audit and Risk Committee met six times (four full-day meetings and two meetings The Board of Directors establishes the Bank’s general policy. that lasted a few hours) and took part in a full-day It directs the Bank’s affairs at the highest level and issues training seminar; the Compensation, Promotions and the necessary instructions. It also supervises the Bank’s Appointments Committee met six times (for an average of management and those entrusted with it. In addition, it three hours each time). verifies the accomplishment of BCV’s corporate mandate, as defined in Article 4 of the LBCV(ii). Board members receive the minutes and all documents provided to the committees. The chair of each committee The Board of Directors exercises the inalienable powers informs members at Board meetings of important issues described in Article 24, paragraph 4, of the Articles of addressed by the committees and answers any questions Incorporation(i) and carries out all duties that have not raised by them. See section 3.4.2 above for information on been assigned to BCV’s other governing bodies pursuant to the committees’ operational procedures. the LBCV(ii), the Articles of Incorporation(i), or the by-laws.
The CEO attends all regularly scheduled Board meetings It also has the following responsibilities: and retreats. Executive Board members attend whenever issues relating to their divisions are on the agenda. The Board of Directors determines which companies belong to BCV Group, in accordance with the legal provisions applicable
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to the scope of consolidated supervision. Subject to the non- Credit Committee. It also decides on the granting of loans to transferable and inalienable powers of the subsidiaries, it members of the Board of Directors and Executive Board. exercises the same powers relative to the Group, through the directives that BCV issues and the instructions that BCV gives It reviews the external auditor’s annual reports and the its representatives within the Group. activity reports submitted by the Internal Audit Department. It prepares the reports, accounts, and other documents and It decides on the creation, acquisition, sale, and liquidation proposals to be presented to the Shareholders’ Meeting, of subsidiaries, branches, and retail banking offices, and of and approves the strategic development and investment representative offices abroad. It validates the Bank’s investment plans. It approves the budget and the objectives defined by and growth policy, and reviews it periodically. It ensures that the Executive Board. systems for the preparation of financial statements and for financial planning are implemented and maintained, and The Board of Directors determines the Bank’s financial that these systems meet regulatory requirements and those strategy and risk-management policy and strategy, and related to internal and external audits. reviews their appropriateness periodically. In this way, it sets out the overall framework for balance-sheet and The Board of Directors regulates, establishes, maintains, risk management for the Executive Board. It monitors supervises, and regularly validates the internal control system implementation of balance-sheet and risk-management (ICS). The relevant internal framework directive has been policy, in particular by reviewing periodic risk-assessment implemented. The Board regularly discusses its assessment reports prepared in accordance with its instructions, as well of the appropriateness and effectiveness of the ICS with the as those required by the regulatory authorities. Executive Board. For all other matters, refer to the operational procedure set In terms of appointments, the Board of Directors has a up by the Board of Directors and described in section 3.4.3. number of responsibilities that fall outside the powers defined in Article 24, paragraph 4, of the Articles of Incorporation(i). In The Executive Board is responsible for managing and agreement with the Vaud Cantonal Government, it determines directly monitoring the Bank’s business. Its powers include the conditions governing the appointment of its Chair. It drawing up the terms and procedures of operations listed appoints and removes the head of Internal Audit along with in Article 4 of the Articles of Incorporation(i), as defined in all executives in that department with the rank of lead auditor Article 4 of the LBCV(ii). It has the power to institute legal or equivalent, and appoints and removes Bank executives proceedings and represent the Bank in a court of law; it with signing authority. It proposes its own compensation, keeps the Board of Directors informed of any such situation. together with that of its Chairman and the Executive Board, to the Shareholders’ Meeting (new Article 30c of the Articles Furthermore, the Executive Board implements the of Incorporation(i)). It sets the Bank’s overall compensation decisions made by the Board of Directors. It ensures that the level and the compensation of the head of Internal Audit. The organization and internal audit procedure in place at BCV Board also validates the conditions applicable to the Executive meet FINMA requirements on the supervision and internal Board. It determines the method of signing used by the Bank, control of banks and the relevant framework directive i.e., the joint signature of two persons. issued in this regard by the Board of Directors; to this effect, the Executive Board issues the necessary directives The Board of Directors determines the organization and exercises appropriate oversight. It has adopted the ICS and defines terms of reference by means of by-laws, the implementing directive. organization chart for divisions and departments, other regulations, and tables of terms of reference. In particular, The Executive Board draws up the Bank’s financial strategy it draws up the quantified terms of reference assigned to through the CFO, the risk-management policy and strategy the Executive Board. It approves the Bank’s lending policy through its Risk Management Committee, and the lending upon the recommendation of the Executive Board, and policy through its Credit Committee. It is responsible for the technical standards and regulations governing lending preparing periodic risk-assessment reports in accordance authority upon the recommendation of the Executive Board’s with the instructions of the Board of Directors and prepares
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all documents that will be used in the decision-making and statements, risks, asset and liability management (ALM), monitoring processes relative to operations and business compliance, and legal matters. In principle, Executive dealings that involve special risks. It is responsible for overall Board members attend whenever issues relating to risk management within the framework set by the Board their division are under discussion. Executive Board of Directors, regularly verifies compliance with disclosure members in charge of front-office divisions present a and reporting requirements defined by the regulatory business review to the Board of Directors twice a year. In authorities, and monitors compliance with risk-exposure addition to approving the half-year and full-year financial limits set by the Board of Directors. statements provided by the Financial Accounting Department and presented in detail to both the Audit The Executive Board publishes the financial statements and Risk Committee and the Board of Directors, the after they are approved by the Board of Directors. It then Executive Board sends (and in some cases, presents) prepares the cash-flow and shareholders’ equity statements, quarterly reports on the following issues to the Board of which it publishes in accordance with current regulations. It Directors: risks, ALM, equity, investor relations, human draws up the budget of foreseeable revenues and expenses resources, and investment policy. It also provides half- and submits it to the Board of Directors. It sets the rates yearly reports on compliance and legal matters. The and conditions applicable to the Bank’s various types of Board of Directors also reviews the parent company and operations. It also coordinates the activities and processes consolidated financial statements for the first and third of the divisions and the strategic units. quarters.
It may issue or decide to participate in public or private The “Risk Management” section (pages 58–67) provides bond offerings for the Bank’s own account, buy, sell, equip, a summary of BCV’s risk management procedures and or renovate buildings within the limits set by the Board of an overview of its risk profile. Note 7 of the financial Directors, and carry out other own-account operations statements (pages 123–126) explains the principles within the criteria specified by the Board of Directors. It applied by the Bank in assessing and managing risk. may approve the outsourcing of activities in compliance The Bank publishes a Basel III Pillar 3 report, which is with the FINMA directive. updated every six months and can be found in the Investor Relations section of the BCV website (https:// Subject to the powers of the Board of Directors, it hires www.bcv.ch/en/About-us/Investor-Relations). and dismisses employees, whose rights, obligations, and responsibilities are defined in the employee handbook. A Management Information System (MIS) was approved It appoints and removes senior executives in accordance by the Board of Directors to monitor and steer with the powers granted to it under the by-laws. It makes performance across the Bank, broken down by segment. recommendations on the Bank’s overall compensation Monthly reports are sent to each manager of a specific level to the Board of Directors, through the Compensation, segment and presentations are made to the Executive Promotions and Appointments Committee. Board each month. The MIS contains information not only on financial performance but also on business 3.6 Monitoring the Executive Board activity, margins, risk, operational indicators, and human resources. In addition, it includes market watches. The The Board of Directors supervises the Executive Board CEO provides the Board of Directors with budget reports with the support of the Internal Audit Department, and regular updates on business trends based on the MIS the external auditors, and the Board of Directors’ reports, including a summary report every six months. committees in accordance with the operational procedures described in section 3.4.3, the objective of No member of the Board of Directors belongs to the which is to ensure good governance. Executive Board or exercises any management function whatsoever at the Bank or its subsidiaries, in compliance The CEO attends all meetings of the Board of Directors, with the principle of independence stipulated in Swiss including retreats. The CFO is always present when banking regulations. there are items on the agenda concerning the financial
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Internal Audit Department found that the Bank is in compliance with the standards The Internal Audit Department is a constituent entity of issued by the Institute of Internal Auditors (IIA) and with BCV pursuant to Article 14 of the Articles of Incorporation(i). the requirements of FINMA Circular 2017/01. Lastly, the It reports directly to the Board of Directors. It performs Internal Audit Department is required to regularly develop regular audits of all the Bank’s operations and has an and present a five-year internal audit strategy to the Risk unlimited right to access information for this purpose. and Audit Committee for approval; the most recent one Its organization, sphere of operations, procedures, and was approved in 2019. The strategy is discussed at the cooperation with the external auditors are defined in meetings of the Executive Board and the Board of Directors its regulations. The Department is independent of the and is communicated to the boards of other BCV Group Executive Board. Its responsibilities extend to all entities companies. directly or indirectly controlled by the Bank in the areas of banking, finance, and IT. The head of the Internal Audit Department attends all meetings of the Audit and Risk Committee, as well as Every year, the head of the Internal Audit Department meetings of the Executive Board and Board of Directors coordinates with the external auditors to draw up a six-year when required. plan. That annual audit plan, respectively the multi-year plan drawn up, is discussed with the executive boards of 4. Executive Board the parent company and BCV Group companies, approved by the Audit and Risk Committee, and submitted for 4.1 Members of the Executive Board information purposes to the Board of Directors. It may be changed during the year by the head of the Internal Audit Information about members of the Executive Board can be Department, subject to approval by the Audit and Risk found on the following pages (NB: pursuant to Article 27 of Committee. the Articles of Incorporation(i), only the CEO is appointed by the Vaud Cantonal Government, while the other members The Internal Audit Department has complete freedom are appointed by the Board of Directors). in preparing and executing its tasks and presenting its conclusions. After completing its work, the Department submits detailed audit reports to the Executive Board, the Audit and Risk Committee, and the Board of Directors, and provides copies to the external auditor, with which it shares all of its conclusions. It also draws up half-yearly activity reports, which include an overview of all ongoing auditing activities within BCV Group. The report is intended for the Audit and Risk Committee and is also discussed at meetings of the Executive Board and the Board of Directors.
Supervision and regular evaluations of the Internal Audit Department are delegated to the Audit and Risk Committee. Every year, the Committee assesses the Department’s cooperation with the external auditor, decides whether the Department is efficient and has the necessary resources and appropriate skills, and ensures that it performs its activities independently and objectively. The Audit and Risk Committee also has an objective external audit carried out at least once every five years, in accordance with international standards. This audit looks at all of the Internal Audit Department’s systems and activities; the most recent one was conducted in 2016 and
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Name, year of birth Position and and nationality start date Education Career experience Pascal Kiener, CEO since 1 May MSc in mechanical Between 1985 and 1991, Mr. Kiener worked as an engineer for 1962, 2008 and CFO engineering from the Fides Informatics in Zurich and Hewlett Packard in Geneva. In Swiss citizen from 1 June 2003 Swiss Federal Institute 1993, he joined the consulting firm McKinsey & Company. In until of Technology in 2000, he was made partner and a member of the Management 31 December Lausanne (EPFL) in Committee of McKinsey Switzerland. He acquired experience 2008 1985. in financial services, and in banking in particular, during MBA from INSEAD in these years as an advisor for leading financial institutions in Fontainebleau in 1992. Switzerland and other European countries. He managed large projects involving strategy, risk management, controlling, and business process re-engineering. Mr. Kiener joined BCV as CFO on 1 June 2003 and was appointed CEO on 1 May 2008.
Stefan Bichsel, Member of the Admitted to the Bar of Following law studies in Lausanne and Bern, Mr. Bichsel 1955, Executive Board Bern Canton in 1982. started his career at UBS. He was admitted to the bars of Swiss citizen with responsibility Master of Laws (LL.M) New York and Connecticut, before working for Pictet & Cie in for the Asset from Georgetown Geneva. In 1994, he was appointed as the first CEO of Swissca Management & University in Holding AG (now Swisscanto). From 1998 to 2001, he served Trading Division Washington, DC in as Chairman of the Board of the Swiss Funds Association since 1 May 2009 1986. (SFA). In 2002, Mr. Bichsel was named to the Management Admitted to the bars Board of Robeco Group (Rotterdam), where he was put in of New York and charge of the company’s operations outside the Netherlands. Connecticut in 1987. From 2003 to 2005, he was Chairman of the Board of Advanced the European Fund and Asset Management Association Management Program (EFAMA) in Brussels. He joined Lombard Odier Darier at the Wharton Hentsch Group (LODH) in 2006 as a partner in the holding Business School, group and member of Group Management. He joined BCV as Philadelphia, in 1994. a Member of the Executive Board with responsibility for the Asset Management & Trading Division on 1 May 2009.
Andreas Member of the BSc in business Mr. Diemant began his career in insurance, working for Diemant, Executive Board administration from Zürich Versicherungs-Gesellschaft and subsequently for La 1968, with responsibility the Bern University of Suisse Assurances in Lausanne. He moved into banking in Swiss citizen for the Corporate Applied Sciences and 1994 when he took a position at UBS in corporate banking Banking Division an Executive MBA for Switzerland’s Mittelland region. Mr. Diemant then rose since 1 September from the Universities through the ranks across all corporate segments to reach 2017 of Bern and Rochester. the position of head of Institutional Clients, Switzerland & Global Asset Servicing. On 1 September 2017, he joined BCV’s Executive Board as head of the Corporate Banking Division.
Gérard Haeberli, Member of the Degree in economics Mr. Haeberli joined Credit Suisse in 1985, where he spent his 1961, Executive Board (with a specialization in career until 30 June 2009. From 1987, he held responsibilities Swiss citizen with responsibility business administration) in private banking in Yverdon-les-Bains and then worked for the Private from the Business and in Zurich before being transferred to the United States, Banking Division Economics Faculty of where he worked in New York and Miami. In 1994 he was since 1 July 2009 Lausanne University in transferred to Lausanne, where he took over responsibility 1983. for an international desk for Credit Suisse Private Banking. Certificates from the In 1998 he was put in charge of the Vaud region, and International Bankers became head of Private Banking for all of French-speaking School in New York, Switzerland in 2000. His responsibilities were extended in Harvard Business 2006 to include all of Credit Suisse’s business lines in French- School in Boston, and speaking Switzerland. He joined BCV’s Executive Board with IMD in Lausanne. responsibility for the Private Banking Division on 1 July 2009.
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Christian Member of the Degree in electronic From 1987 to 1993, Mr. Meixenberger worked as a Meixenberger, Executive Board engineering from the software engineer at the Swiss Center for Electronics and 1960, with responsibility University of Neuchâtel Microtechnology (CSEM) in Neuchâtel before joining Swiss citizen for the Business in 1987. Credit Suisse in Geneva, where he was in charge of business Support MBA from the processes and IT. In 1997, he became head of IT at Banque Division since University of Lausanne Cantonale de Fribourg. He was then appointed to that bank’s 1 January 2017 in 1993. Executive Board as head of the Services Division in 2000. He took up his position as head of BCV’s Business Support Division on 1 January 2017. Thomas W. CFO, member Degree in economics Mr. Paulsen started his career in energy trading. In 1995, he Paulsen, of the Executive from the Business and joined the consulting firm McKinsey & Company, where he 1965, Board with Economics Faculty of was elected Principal Associate in 2000. During his time at Swiss citizen responsibility Lausanne University in McKinsey, he managed a large number of strategic projects for the Finance 1988. for financial institutions and major energy companies in & Risks Division MSc in economics Switzerland and throughout Europe, focusing particularly on since 1 January from the London the risk management aspects. Mr. Paulsen joined BCV in July 2009 School of Economics 2002 as Chief Risk Officer (CRO), and in this capacity created (LSE) in 1989. and led the Risk Management Department. He was named PhD in economics CFO and head of the Finance & Risks Division on 1 January from Lausanne 2009. University in 1992.
Bertrand Sager, CCO, member Master of Law from Mr. Sager began his career at Credit Suisse in 1991, where 1966, of the Executive Lausanne University in he was involved in various lending activities. He joined BCV Swiss citizen Board with 1990. in 1998 and was appointed to lead BCV’s Credit Recovery responsibility Advanced Management Department in 2003. In this position, he played a for the Credit Management key role in strengthening the Bank’s balance sheet by reducing Management Certificate from the volume of impaired loans. In addition, as a member of Division since INSEAD in the Executive Board’s Credit Committee since 2008, he has 15 February 2010 Fontainebleau in 2007. acquired a thorough understanding of BCV’s lending activities. Mr. Sager was named Chief Credit Officer and appointed to the Executive Board with responsibility for the Credit Management Division as of 15 February 2010. José François Member of the Degree in economics Mr. Sierdo began his banking career in 1993 in retail banking at Sierdo, Executive Board and business UBS. He went on to do project finance in New York and lending 1963, with responsibility administration from in Zurich, before working at Lombard Odier & Cie from 1998 to Swiss citizen for the Retail the Business and 2002. He then returned to UBS, where he held key managerial Banking Division Economics Faculty of positions in retail, private, and corporate banking, including: head since 3 March Lausanne University in of Private Banking for French-speaking Switzerland, CEO of UBS 2014 1992. Luxembourg, and head of Corporate Clients for Switzerland. MBA from IMD in Before becoming a banker, he was a military pilot and a member Lausanne in 2001. of the Swiss Air Surveillance Wing. He joined BCV’s Executive Board as head of the Retail Banking Division on 3 March 2014.
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Pascal Kiener CEO
Gérard Haeberli Member of the Executive Board, Head of Private Banking
Andreas Diemant Stefan Bichsel Member of the Executive Board, Member of the Executive Board, Head of Corporate Banking Head of Asset Management & Trading
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Thomas W. Paulsen Member of the Executive Board, CFO, Head of Finance & Risks
José F. Sierdo Member of the Executive Board, Head of Retail Banking
Christian Meixenberger Bertrand Sager Member of the Executive Board, Member of the Executive Board, Head of Business Support Head of Credit Management
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4.2 Other activities and business relations (at 31 December 2019)
Executive Board members also perform the following functions:
Pascal Kiener • Member of the Board of Directors of the Swiss Bankers Association • Member of the Board of Directors and the Board Committee of the Union of Swiss Cantonal Banks • Member of the Board of Directors and the Steering Committee of the Vaud Chamber of Commerce and Industry • Chairman of the “Fonds de prévoyance en faveur du personnel de la BCV” • Member of the Board of the BCV Foundation • Member of the Board of the Geneva Financial Center Foundation • Member of the Foundation Board of the Swiss Finance Institute, Zurich • Member of the Strategic Advisory Board of the Swiss Federal Institute of Technology in Lausanne (EPFL) • Member of the Foundation Board of Foot Avenir, Paudex Stefan Bichsel • Chairman of the Board of Directors of GEP SA, Lausanne • Chairman of the Board of Directors of Gérifonds SA, Lausanne • Member of the Board of Directors of Banque Cantonale du Jura SA, Porrentruy • Member of the SIX Strategic Advisory Board, Zurich • Member of the International Orientation Committee of EDHEC, Lille and Nice • Chairman of the Pro Aventico Association, Avenches
Andreas Diemant • Member of the Executive Committee of the Economic Development – Canton of Vaud (DEV)
Gérard Haeberli • Chairman of the Board of Directors of Piguet Galland & Cie SA • Member of the Board of the Institute for Studies in Finance and Banking (ISFB) • Member of the Business Advisory Board of the University of Lausanne’s Faculty of Business and Economics
Christian • Member of the Board of Directors and Audit and Risk Committee of Aduno Holding SA Meixenberger • Member of the IT Commission of the Canton of Fribourg • Member of the SIX Strategic Advisory Board, Zurich Thomas W. Paulsen • Member of the Board of Directors and the Audit and Risk Committee of Piguet Galland & Cie SA • Chairman of the Swiss Cantonal Bank Issuing Committee • Member of the Board of Directors of the Swiss Cantonal Banks’ Central Mortgage Bond Institution • Member of the Foundation Board of the “Caisse de pensions de la Banque Cantonale Vaudoise” • Member of the Board of the “Fonds de prévoyance en faveur du personnel de la BCV” • Member of the Foundation Board of ISREC
Bertrand Sager • Committee member of the Chambre Vaudoise Immobilière • Member of the Board of Directors of GEP SA • Member of the Board of the “Caisse de pensions de la Banque Cantonale Vaudoise” • Member of the Board of the “Fondation de prévoyance en faveur de l’encadrement supérieur de la BCV” • Member of the Board of the “Fonds de prévoyance en faveur du personnel de la BCV” • Judge for property disputes at the Eastern Vaud District Court • Member of the Management Committee of the “Fonds cantonal de lutte contre la précarité”
José F. Sierdo • Member of the Board of Directors of newhome.ch AG • Member of the Board of Directors of TWINT AG and TWINT Acquiring AG • Member of the Board of Directors and Treasurer of the Vaud Banking Association (AVB) • Member of the Board of Directors and Treasurer of the Vaud Foundation for Banking Education (FVFB)
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Internal organization of the Executive Board The Executive Board has set up several committees, each of which consists of a chairman and members appointed for The Executive Board may delegate its powers and duties as an indefinite period by the Board and drawn from its own provided in the by-laws, subject to applicable laws, Swiss ranks or among senior executives. Bankers Association agreements, circulars issued by FINMA and other supervisory authorities, and directives of the In accordance with BCV’s by-laws, the CEO has a right of veto, Board of Directors. which must be duly recorded when used. In such cases, the CEO must inform the Chairman of the Board of Directors. In particular, the Board may appoint committees to prepare and implement its decisions, make decisions, and oversee 4.3 Management contracts various matters. The Bank has not entered into any management contracts.
Committee name, composition (at 31 December 2019) Main roles Risk Management Committee • Submits risk management policy and strategy proposals to the Executive Board Thomas W. Paulsen (Chairman) for approval by the Board of Directors Pascal Kiener • Ensures risk management and control processes are implemented and updated Stefan Bichsel for the entire Bank and for all risk categories Andreas Diemant • Monitors the Bank’s overall risk profile Bertrand Sager • Steers all the Bank’s risk management projects Maxime Mermier
Asset and Liability Management • Examines the exposure of the banking book to interest-rate risk and exchange- Committee (ALCO) rate risk, as well as the Bank’s exposure to liquidity risk Pascal Kiener (Chairman) • Manages interest-rate-risk exposure on the balance sheet Thomas W. Paulsen • Manages the Bank’s liquidity and funding Gérard Haeberli Andreas Diemant José François Sierdo Christopher Cherdel Michel Aubry Fernando Martins da Silva
Credit Committee • Submits proposals concerning the Bank’s lending policy, technical standards Bertrand Sager (Chairman) and regulations governing lending authority to the Executive Board for approval Pascal Kiener by the Board of Directors Andreas Diemant • Makes decisions on the granting of lending authority José François Sierdo • Makes decisions regarding the granting and renewing of major lending facilities, Christian Zünd within the limits of its powers • Monitors the Bank’s loan portfolio, particularly the sector breakdown • Oversees credit-limit and overdraft management
Information Technology Committee • Submits IT strategy proposals to the Executive Board for approval by the Board Christian Meixenberger (Chairman) of Directors Pascal Kiener • Submits proposals on the budgetary framework and the medium-term plan Thomas W. Paulsen for high-priority projects José François Sierdo • Monitors the implementation of IT projects Serge Messin • Obtains information on major IT incidents and corrective measures taken Denys Papeil
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5. Compensation, shareholdings, and loans components of the compensation system and their related rules of application. 5.1 Content and procedure for determining compensation levels and share-ownership programs Every year the Bank participates in two salary surveys carried out by specialized firms Hostettler & Co and Willis Towers The Board of Directors approved a compensation Watson. Those two firms use the surveys to produce handbook on 5 March 2010, which was amended on statistics on salary trends for virtually all banking positions, 7 November 2014 to take account of changes to BCV’s and they provide these numbers to BCV. In 2019, apart from Articles of Incorporation(i) that were approved at the these statistical sources, the Bank did not call on the services Shareholders’ Meeting held on 1 May 2014. The handbook of any other external consultants in order to determine the was again amended in 2016 following the decision to amounts that would be paid at each level of responsibility extend the minimum lock-up period for shares granted within the Bank, or to modify its compensation system. as annual performance-based compensation from three The Bank did not carry out any comparative studies on the years to five years. The compensation handbook governs compensation of the Executive Board last year. the compensation-related roles and responsibilities of the Shareholders’ Meeting, the Board of Directors, The current compensation system at BCV aims to promote the Compensation, Promotions and Appointments individual and team performance, skills development, and Committee, the Executive Board, and Human Resources. professionalism to ensure the long-term success of the Bank It also provides a detailed description of the various while fulfilling its legally mandated corporate missions.
Long-term Share- Annual performance-based performance-based ownership plan Base salary compensation compensation (optional) Board of 100% cash Directors Executive Board1 100% cash Maximum: From 0%-100% of total Maximum 100 100% of base salary approved by shareholders BCV shares 70% cash 30% in BCV 100% in BCV shares 100% in BCV shares with paid at the end of the shares with a at least a 5-yr 3-yr plan 3-yr lock-up lock-up period period Department 100% cash 70% cash 30% in BCV 100% in BCV shares 100% in BCV heads1 shares with paid at the end of the shares with a at least a 5-yr 3-yr plan 3-yr lock-up lock-up period period All other 100% cash 100% cash. 100% in BCV employees1 30% of annual performance- shares with a based compensation in BCV 3-yr lock-up shares with a 3-yr lock-up period period if that performance-based compensation is > CHF 21,000
1 All fees and other amounts received by employees representing BCV are remitted to the Bank.
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The components of the system are base salary, annual Overall fixed compensation between one Shareholders’ performance-based compensation, and the employee Meeting and the next is subject to approval at the share-ownership plan. In addition, the Executive Board and Shareholders’ Meeting. senior management are eligible for long-term performance- based compensation. No stock-option plans are offered as Executive Board part of compensation. The compensation of the members of the Executive Board is based on the degree to which they meet their unweighted Detailed compensation figures can be found in the tables qualitative and quantitative objectives. For members, these on pages 180-181. objectives are set and evaluated by the CEO; for the CEO, they are set and evaluated by the Board of Directors. Board of Directors The overall compensation for the Executive Board is The Board of Directors receives only fixed compensation set by the Board of Directors on the recommendation composed of fees, compensation for sitting on the various of the Compensation, Promotions and Appointments committees, and expenses. The Bank does not make any Committee. The fixed compensation (base salary, taxable occupational-pension contributions on behalf of the seven entertainment expenses, seniority bonuses, and employee members of the Board. Members of the Board do not receive share-ownership plan) from one Shareholders’ Meeting separate annual variable performance-based compensation. to the next, as well as the annual performance-based compensation for the previous calendar year, are subject Members of the Board do not participate in the employee to approval at the Shareholders’ Meeting. At each Meeting, share-ownership plan. shareholders also approve the maximum number of shares that may be made available as long-term performance- The compensation of all members of the Board, except the based compensation under the multi-year plan beginning Chairman, is set by the full Board of Directors upon the in the current year. More details are given on page 181. recommendation of the Compensation, Promotions and Appointments Committee. The Chairman’s compensation Base salary is set by the Board of Directors (excluding the Chairman), The base salary of each member of the Executive Board upon the recommendation of the Vice Chairman (see also is set individually by the Board of Directors taking into section 3.4.4 on page 82). account the person’s experience, job description and scope
BCV share grants, lock-up periods, and vesting N N+1 N+2 N+3 N+4 N+5
Annual performance- Lock-up period of at least 5 yrs Executive Board and based compensation Department heads 3-yr lock-up period Employees opting to receive part of compensation in shares
Long-term performance- Executive Board and 3-yr plan based compensation Department heads
Share-ownership plan 3-yr lock-up period All employees
Shares granted Shares vested Plan established, including the maximum number of shares that can be granted
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of responsibilities, as well as market values for equivalent the completion of key projects, which it uses to adjust the positions. The base salary is paid exclusively in cash, in 12 overall level of annual performance-based compensation monthly installments. within a range of +/- 20%.
Annual performance-based compensation Once defined, the overall level is broken down by division, All members of the Executive Board are eligible for annual by the CEO, based on each division’s results. performance-based compensation. An overall level of annual performance-based compensation is set for the The individual evaluation of each Executive Board member Bank and allocated to members of the Board individually, is based on the degree to which the individual’s objectives, based on each member’s performance. which are set at the start of the period, are met. These include objectives stemming directly from the Bank’s The overall level of annual performance-based long-term strategy as well as short-term objectives. The compensation is calculated on the basis of the Bank’s evaluations of the Executive Board members are carried out financial performance, which is adjusted to reflect the by the CEO, submitted to the Compensation, Promotions degree of achievement of the Bank’s strategic objectives, and Appointments Committee for their recommendation, implementation of key projects, operational excellence, and then sent to the Board of Directors for approval. The and customer satisfaction. evaluation of the CEO is carried out by the Chairman of the Board of Directors, submitted to the Compensation, Financial performance is measured by the return on equity, Promotions and Appointments Committee for their calculated taking shareholders equity at the minimum recommendation, and then sent to the Board of Directors target capital ratio (see page 12). The overall level of for approval. The evaluations, based on a 5-level scale, annual performance-based compensation is calibrated to are used to determine the level of performance-based a benchmark amount. It varies linearly within a range of compensation for that year. For Executive Board members, +/- 40% of the benchmark amount, based on where the this level cannot exceed 100% of their base salary. Bank’s ROE lies on a range between a minimum of 10% and a maximum of 21%. 30% of the performance-based compensation for Executive Board members must be taken in BCV shares with a lock- The Board of Directors then conducts a holistic evaluation up period of between five and ten years, according to each of the achievement of the Bank’s strategic objectives and Executive Board member’s choice.
Annual performance-based compensation - Financial performance
Overall level
Max. +40%
Benchmark amount
ROE Min. -40% (calculated based on the minimum target capital ratio)
10%ROE 21%
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For the 2019 financial year, these shares will be allocated at table. The number of shares distributed can never exceed the closing price on 11 May 2020, subject to shareholder 100% of the share allocation approved at the Annual approval of Executive Board compensation at the Annual Shareholders’ Meeting. Shareholders’ Meeting. Based on the amount submitted to shareholders at the Annual Shareholders’ Meeting, the ratio between the annual performance-based compensation and Average score for Share-allocation strategic and qualitative adjustment factor linked the base salary will be 77.25% for the 2019 financial year. objectives to financial performance
Long-term performance-based compensation 1 –40% The purpose of long-term performance-based 2 –20% compensation is to further the Bank’s long-term strategic 3 0% development by generating lasting shareholder value. 4 +20% Long-term performance-based compensation is paid 5 +40% exclusively in BCV shares.
Objectives, which have financial, strategic, and qualitative Each evaluation, through the financial, strategic, and components, are set through three-year plans, with a new qualitative components, is presented to and discussed plan starting each year. by the Executive Board. The CEO submits the Executive Board’s proposal to the Compensation, Promotions and At the start of each plan, the maximum number of shares Appointments Committee for its recommendation and that can be allocated to the Executive Board, which then to the Board of Directors for approval. cannot exceed a total value of CHF 1.2 million (rounded), is submitted to shareholders at the Annual Shareholders’ The cost of the plan is spread over the entire period. The cost Meeting for approval. is recalculated in line with the objectives achieved and the number of remaining participants, and adjusted accordingly. The financial component is measured in terms of economic The cost of each plan is spread over the relevant financial years. profit, which is calculated on the basis of the profit generated after deducting the cost of equity using an approach that All proceeds and dividends from shares acquired for the plans, factors in the Bank’s risk level. The Bank’s three-year plan before they are allocated, are paid to the Bank. will be considered fully executed if it generates the targeted level of economic profit, in which case 100% of the share The 2017–2019 plan, which ended on 31 December 2019, was allocation approved at the Annual Shareholders’ Meeting based on the Bank’s actual cumulative economic profit and can be distributed. However, if economic profit is below the following strategic and qualitative objectives: 60% of the target, the share allocation linked to financial performance will be reduced to zero. • Growing the Bank’s customer base slightly faster than population growth in Vaud The share allocation linked to financial performance is • Evolving the Bank’s digital banking/multichannel services then adjusted to reflect the extent to which strategic and in line with its position as a “quick, smart follower” qualitative objectives have been achieved. These objectives • Measuring and continuously improving customer service are set with the Board of Directors and relate to implementing quality as a part of the “Smile” project the Bank’s strategy and driving change within its operations. • Creating new wealth-management products as part of BCV Conseil Each objective is evaluated on a 5-level scale, the average • Approving the IT strategy and deciding on sourcing. of which determines the adjustment factor for the share allocation linked to financial performance. The number Economic profit reached 114% of the objective. In addition, of shares that will ultimately be distributed is calculated the Board of Directors determined that the strategic and by applying the percentages shown in the following qualitative objectives were achieved.
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Overview of long-term performance-based compensation plans for the Executive Board Initial Market Number of Average cost of Number Market value of Starting Performance Year shares set cost the plan for of shares value distributed year period distributed aside per share the Bank distributed (per share) shares 2014 2013 to 2015 2016 3,554 464.00 1,649,056 2,125 654.00 1,389,750 2015 2014 to 2016 2017 3,612 521.00 1,881,852 2,372 690.50 1,637,866 2016 2015 to 2017 2018 2,735 548.50 1,500,148 1,786 796.00 1,421,656 2017 2016 to 2018 2019 1,832 654.00 1,198,128 1,374 797.00 1,095,078 2018 2017 to 2019 2020 1,832 690.50 1,200,089 1,519 810.00 1,230,390
For the plan ending on 31 December 2019, 1,738 shares • Annual performance-based compensation were set aside for the members of the Executive Board, • Long-term performance-based compensation corresponding to a value of CHF 1,200,089 on the date (only for department heads) on which the Board of Directors made its decision. After • Employee share-ownership plan. assessing the degree to which the objectives were achieved, 1,519 shares were distributed, equal to 87.4% of the total Base salary number approved at the 2017 Annual Shareholders’ The base salary of each employee is set according to the Meeting. Not all of the shares set aside were distributed job description and in line with current market practice. because one Executive Board member retired. Salary increases depend on the extent to which skills- development objectives have been achieved. A new three-year plan, for which 1,504 shares have been set aside, began in 2019. The base salary is paid out in cash, in 13 monthly installments.
Employee share ownership Annual performance-based compensation Executive Board members have the right to subscribe at All employees are eligible for annual performance-based most 100 shares at a reduced price. The subscription price compensation, provided their contracts have not been is set every year by the Board of Directors. With the aim of terminated. The overall level of annual performance- promoting a medium-term vision, the shares are subject to based compensation is broken down by division and a three-year lock-up period. then by department. Each employee then receives annual performance-based compensation based on the extent Other compensation to which his or her performance objectives stemming Compensation also includes taxable incidental expenses. from the Bank’s strategy are met.
Twenty extra days of vacation are awarded to Executive The amount of annual performance-based compensation Board members when they complete 10, 20, 30, or 40 years’ that individual employees receive is determined according service at BCV. to an evaluation process. At the beginning of the year, employees sit down with their supervisors to set annual Other employees performance objectives, which stem from the Bank’s Compensation for non-executive employees follows the strategy and action plans. A final evaluation at the end same principles as that of Executive Board members and of the year assesses the degree to which these objectives includes the following components: have been met; this is then used to determine the exact • Base salary amount of performance-based compensation to be paid.
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For department heads, 30% of annual performance-based Code of Obligations, it is not subject to the Ordinance compensation must be taken in BCV shares with a lock- against Excessive Compensation in Publicly Listed up period of five to ten years. Other employees receiving Companies (ORAb). Nevertheless, the Bank decided to annual performance-based compensation of CHF 21,000 incorporate the principles of the ORAb into the Articles or more may opt for full payment in cash, or 70% in cash of Incorporation(i) insofar as they were compatible with and 30% in BCV shares with a lock-up period of three the LBCV(ii) (see Articles 30a et seq. of the BCV Articles years. In the latter case, BCV increases the amount paid of Incorporation(i) on compensation). Accordingly, at in shares by 30%. For the 2019 financial year, these shares the 2020 Shareholders’ Meeting, a vote will be taken on will be allocated at the closing price on 19 March 2020. the fixed compensation of the Board of Directors and All other employees receive full payment of their annual the Executive Board for the period between the 2020 performance-based compensation in cash. and 2021 Meetings. There will also be votes on the 2019 annual performance-based compensation for the entire Long-term performance-based compensation Executive Board and on the number of shares available Department heads receive long-term performance-based as long-term performance-based compensation under compensation on the same terms as Executive Board the plan beginning in 2020. As BCV is not subject to the members. ORAb, it is required to continue providing compensation reports in the form of a section in its annual report Employee share ownership (Article 30e of the Articles of Incorporation(ii) – see note Management considers employee share ownership to be 5.17 on page 179). an essential element in staff loyalty and identification. An in-house subscription program entitles all BCV employees 5.2 Transparency concerning compensation, to subscribe shares at a reduced price. The number of shareholdings and loans by issuers with their shares that may be purchased under this program is registered office abroad determined by the level of responsibility inherent in an employee’s position and can range from 10 to 100 shares. This point does not apply to BCV. The subscription price is set every year by the Board of Directors. With the aim of promoting a medium-term 6. Shareholders’ rights vision, the shares are subject to a three-year lock-up period. Article 18 of the Articles of Incorporation – Voting Rights Other compensation Each share entitles the holder to one vote. No shareholder Department heads receive tax-exempt incidental shall be entitled to vote at a Shareholders’ Meeting either expenses. personally or by proxy, or to exercise associated rights, unless entered in the shareholder register. Shareholder A seniority bonus equivalent to a month’s salary is status and the right to appoint a proxy shall be determined payable to all employees when they complete 10, 20, 30, on the basis of the share register on the twentieth day prior or 40 years’ service at BCV. Employees may opt to take to the Shareholders’ Meeting. extra vacation, i.e., 20 days for full-time staff, instead of the bonus, or they may opt to take half the bonus and half 6.1 Restrictions on voting rights and shareholder proxies the extra vacation days. 6.1.1 Restrictions on voting rights Contracts The CEO and other members of the Executive Board work Restrictions on voting rights are set out in Articles 12 and under an employment contract with a 12-month notice period. 13 of the Articles of Incorporation, the main provisions of which are described below. Application of the Ordinance against Excessive Compensation in Publicly Listed Companies Article 12 – Shareholder register As stated above, because BCV is a public-sector entity The Bank shall recognize as shareholders only those within the meaning of Article 763, paragraph 2, of the Swiss persons validly entered in the shareholder register. Only
96 2019 Annual Report 97 Corporate Governance
those whose names appear in the register may exercise the At any Shareholders’ Meeting convened to vote on the rights attached to BCV shares, subject to the restrictions removal of a clause relating to restrictions on the transfer provided herein. of registered shares, such removal shall be decided by an absolute majority of votes attached to the shares Shareholders without the right to vote may not exercise such represented, where each share shall entitle the holder to a right or any other associated right. Shareholders with the one vote (Article 11, paragraphs 3 and 4, of the LBCV(ii)), right to vote may exercise all rights attached to the shares. in compliance with the rules applicable to any resolution of the Shareholders’ Meeting. Article 13 – Transfers of registered shares The transfer of any registered share and its entry in the 6.1.2 Exemptions granted during the financial year share register shall be subject to approval by the Board of Directors. (...) If the Board of Directors does not reject the During the 2019 financial year, no departure from the request within twenty days, the acquirer shall be recognized above restrictions was made. as a shareholder with voting rights. The rules governing attendance at Shareholders’ Meetings The Board of Directors may refuse to register an acquirer as are set forth in Articles 16 and 18 of the Articles of a shareholder with voting rights: Incorporation, the main provisions of which are shown in sections 6.3, 6.4, and 6.5 below. a) in respect of a shareholding exceeding 5% of the Bank’s share capital held by a single shareholder or group of 6.2 Quorum provisions shareholders as defined by the Federal Act on Stock Exchanges and Securities Trading. (…) That limit shall Provisions for quorums are set out in Article 19 of the not apply to the Canton of Vaud or any third party to Articles of Incorporation. which the Canton of Vaud sells part of its shareholding, or to the takeover of a company or part of a company; Article 19 – Quorum provisions; resolutions The Shareholders’ Meeting shall have the power to transact b) if a shareholder does not expressly state, when requested business irrespective of the number of shares represented. to do so, that he/she has acquired the shares in his/her own name and for his/her own account; Resolutions put to the vote shall be decided by an absolute majority of votes attached to the shares represented, and in c) if and so long as his/her recognition could prevent the the event of a tie, the Chairman shall have the casting vote. Bank from furnishing proof of the shareholder base Shares held by the Canton do not vote on the election of required under Swiss law. Under Article 16 of the Articles members of the Board of Directors carried out pursuant to of Incorporation(i) (convening a Shareholders’ Meeting – Article 15(b). see section 6.4 below for the text of the article), one or more shareholders together representing no less than one- 6.3 Convening shareholders’ meetings tenth of the share capital may also request the convening of a Shareholders’ Meeting. Shareholders representing Article 16 – Meetings shares with an aggregate par value of thirty thousand Shareholders’ Meetings shall be convened by the Board of Swiss francs may request that an item of business be Directors at least once a year. entered on the agenda. The calling of a Shareholders’ Meeting and the inclusion of an item of business on the The Annual Meeting shall take place within six months agenda must be requested in writing, stating the business of the close of the financial year at the headquarters of to be discussed and motions to be submitted. the Bank or at any other place in Vaud Canton as may be determined by the Board of Directors. Any individual motion requiring a vote shall be submitted to the Chairman of the Board of Directors in writing at Special Shareholders’ Meetings may be convened as often least forty-five days prior to the Meeting. as required. (...)
98 2019 Annual Report 99 Corporate Governance
A Shareholders’ Meeting may, if necessary, be convened by 7.2 Takeover clauses the Auditors. There are no agreements or programs that would benefit 6.4 Agenda members of the Board of Directors or the Executive Board or other BCV executives in the event of a takeover. Article 16 (excerpt) – Meetings One or more shareholders together representing no less 8. Auditors than one-tenth of the share capital may also request the convening of a Shareholders’ Meeting. Shareholders 8.1 Term of audit and length of service of lead auditor representing shares with an aggregate par value of thirty thousand Swiss francs may request that an item The Board of Directors chose KPMG SA in Geneva as its of business be entered on the agenda. The calling of a external auditor, within the meaning of the FINMA law Shareholders’ Meeting and the inclusion of an item of and the Swiss Banking Act, for the 2019 financial year. At business on the agenda must be requested in writing, the Annual Shareholders’ Meeting on 2 May 2019, BCV stating the business to be discussed and motions to be shareholders approved the Board’s recommendation to submitted. appoint KPMG SA as the Bank’s external auditor for 2019. KPMG SA has served as the external auditor within the Any individual motion requiring a vote shall be submitted meaning of the FINMA law and the Swiss Banking Act, as to the Chairman of the Board of Directors in writing at least well as the external auditor for the Bank since 2016. The forty-five days prior to the Meeting. lead auditor since 2016 is Oliver Gauderon, an audit expert licensed by the Federal Audit Oversight Authority and by 6.5 Shareholder registration FINMA.
Article 18, paragraph 2, of the Articles of Incorporation(i) Under Article 20 of the LBCV(ii), the Bank is required to stipulates that shareholder status and the right to appoint regularly rotate the individuals and firms serving as the a proxy shall be determined on the basis of the shareholder auditor in charge and external auditor. A regular rotation register on the twentieth day prior to a Shareholders’ is considered to be every seven years, according to the Meeting. interpretation of the Article by both the Canton of Vaud’s Legal and Legislative Service and the Bank. Pursuant to paragraph 1 of the same Article, the right to vote at the Meeting shall be exercised by the shareholder 8.2 Audit fees registered in the share register or by his or her proxy, who may not necessarily be a shareholder. At the Meeting Fees invoiced by KPMG SA for its audits of the parent held on 2 May 2019, Christophe Wilhelm, a Lausanne- company and consolidated financial statements, its statutory based attorney, was elected to be the Independent Proxy audit pursuant to the Federal Act on Banks and Savings until the end of the Meeting to be held on 30 April 2020. Institutions and the Federal Act on Stock Exchanges and Pursuant to Article 18a, paragraph 5, of the Articles of Securities Trading (including audit-related work required by Incorporation(i), BCV will offer shareholders an electronic FINMA), certificates required under local law, and its audit of means of providing their instructions to the Independent BCV as a custodian bank for investment funds amounted to Proxy for the Meeting. CHF 1,832,727 for the 2019 financial year.
7. Takeovers and defense measures Fees invoiced by KPMG SA in Switzerland and abroad for financial and statutory audits of other BCV Group 7.1 Obligation to make a bid companies were CHF 414,920 for the 2019 financial year.
The Articles of Incorporation do not contain an opting-out Total fees invoiced by KPMG SA for audit services supplied or opting-up clause based on Article 125 of the Financial to all the companies which make up BCV Group therefore Market Infrastructure Act (FMIA). amounted to CHF 2,247,647 in the reporting year.
98 2019 Annual Report 99 Corporate Governance
8.3 Additional fees make recommendations on internal audit procedures, and be informed of reports by other persons invited to Fees invoiced by companies within the KPMG SA group for the meetings. In 2019, representatives of the external other auditing and assurance services totaled CHF 214,862 auditors partially attended three meetings of the Board of for the parent company and CHF 15,680 for other BCV Directors and all ordinary meetings of the Audit and Risk Group companies. Committee.
Total additional fees for the 2019 reporting period invoiced The Chairman of the Board of Directors meets with by KPMG SA in Switzerland and abroad for all BCV Group the auditor in charge of the audit approximately once companies therefore amounted to CHF 230,542. every quarter to see whether the work is proceeding as planned; the Chairman of the Audit and Risk Committee Full compliance with regulations concerning the attends once a year. The Chairman of the Audit and Risk independence of auditors has been verified by the Audit Committee also holds regular meetings with the auditor, at and Risk Committee. least once per quarter. A summary report is then submitted to all members of the Board of Directors, the Audit and 8.4 Monitoring of external auditors Risk Committee, and the Executive Board.
The Audit and Risk Committee scrutinizes the work 9. Disclosure policy of the external auditors. In particular, it monitors their independence and performance on behalf of the Board 9.1 Transparency of Directors so that the Board can make an informed recommendation to the Shareholders’ Meeting on whether Pursuant to paragraphs 8 and 9 of Article 24 of the Bank’s to extend the appointment of the auditors. The external Articles of Incorporation(i), the Board of Directors shall see auditors submit a half-yearly activity report to the Audit that it is kept informed. It shall also see that shareholders and Risk Committee, which reviews the report at a meeting are properly and fairly informed about the Bank’s situation in the presence of representatives of the external auditors. to the greatest extent possible, consistent with legitimate Furthermore, the Audit and Risk Committee conducts a compliance with business and banking confidentiality and detailed evaluation of the external auditors once a year. securities laws. In particular, it shall reach an agreement governing disclosure of information to the Canton of Vaud. The Audit and Risk Committee advises the Board of Directors on whether to approve the external auditors’ fees on the 9.2 Information-exchange agreement basis of a retainer letter which is reviewed every year. It also discusses how the audit should be planned and approached, BCV and the Canton of Vaud entered into an initial as well as risk-evaluation procedures and coordination information-exchange agreement on 13 September between the Bank’s internal and external auditors. Non- 2004, which was followed by a second agreement on 7 auditing assignments are submitted for prior approval to the October 2009. In 2015, the two parties negotiated a new Audit and Risk Committee, which, together with the external information-exchange agreement, which was signed on 16 auditors, verifies compliance with the rules of independence. December 2015 and took effect on 1 January 2016.
The Chairman of the Board of Directors and the Chairman This agreement commits the parties to increased of the Audit and Risk Committee receive copies of all the transparency. In particular, it: reports, certifications and opinions issued by the external auditors in the course of their duties. Every year, the • Sets out the content and frequency of information Audit and Risk Committee reviews the parent company’s exchanges and the procedures for providing information, financial statements and regulatory reports and a summary together with the type and frequency of meetings of the reports submitted by the subsidiaries. The external between representatives of the Canton and BCV auditors are regularly invited to attend Audit and Risk Committee meetings to discuss the results of their work, • Defines the confidentiality rules governing these exchanges
100 2019 Annual Report 101 Corporate Governance
• Designates the persons who are to provide and receive of the Meeting are also published in the FOSC and several information on behalf of the Bank and the Canton local daily newspapers. In addition, shareholders listed on the shareholder register at least twenty days before the Annual • Prohibits each party from exploiting for its own purposes Shareholders’ Meeting receive a personal letter of invitation the information received and provided 9.4 Links to main documents referenced • Specifies the legal principles that shall apply, in particular the obligation to make public any information that may Document Link affect the price of BCV shares. (i) Articles of https://www.bcv.ch/content/ Incorporation download/2769/115744/versi- 9.3 Other information on/12/file/Art_Association.pdf Regular publications intended for shareholders are the annual (ii) Cantonal Act https://www.bcv.ch/content/ report (published in April) and the interim report at 30 June Governing the download/2770/31480/version/ (published in August). Printed versions of both are available Organization of 8/file/LBCV.pdf upon request from the following address: BCV, Publications, Banque Cantonale Post Office Box 300, 1001 Lausanne, Switzerland. Vaudoise (LBCV) of 20 June 1995 Information is provided to the public soon after the (iii) Audit and Risk https://www.bcv.ch/content/ consolidated financial statements are approved by the Committee Charter download/8574/85400/version/ Board of Directors, by means of a press release and press 6/file/Charte_CAR.pdf conference. In 2015, the Bank began publishing its financial statements in accordance with the new Swiss accounting standards for banks. As a result of these new accounting 10. Contacts rules, the Bank reports its financial results on a half-yearly rather than a quarterly basis, which means that only results Investor Relations at 30 June and 31 December are released. Gregory Duong Tel.: +41 21 212 20 71 BCV also issues special press releases on important Fax: +41 21 212 33 43 developments and business trends at the Bank as often Email: [email protected] as necessary. Media relations The annual report, interim report and press releases are all Daniel Herrera posted on the BCV website (www.bcv.ch) and are available Tel.: +41 21 212 28 61 via the free BCV Investor Relations iPad app. The annual Fax: +41 21 212 21 06 report and interim report are published in French and Email: [email protected] English, while press releases are normally available in French, English and German. 2020 corporate calendar 30 April Annual Shareholders’ Meeting Basel III Pillar 3 reports, which are published half-yearly, 5 May Ex-dividend date1 and other data of particular interest to investors may also 6 May Dividend record date1 be consulted in the Investor Relations section of the BCV 7 May Dividend payment1 website (www.bcv.ch) as well as via the free BCV Investor 28 May Stock split date2 Relations iPad app. 20 August 2020 half-year results
1) Ordinary dividend of CHF 36 per share, subject to approval BCV publishes notice of its Annual Shareholders’ Meeting at the Annual Shareholders’ Meeting. 2) First trading day on a post-split basis, subject to approval at approximately sixty days in advance in the FOSC (Feuille the Annual Shareholders’ Meeting barring postponements officielle suisse du commerce). The invitation and the agenda further to the Covid-19 situation.
100 2019 Annual Report 101
Financial Statements
Report on the Consolidated Financial Statements 106 10.14 Issued structured products 137 10.15 Bonds and mortgage-backed bonds 138 Consolidated Financial Statements 111 10.16 Provisions 1. Balance sheet 111 Reserves for general banking risks 139 2. Income statement 113 10.17 Stock options and shares granted to members of 3. Cash flow statement 114 the Board of Directors, Executive Board 4. Statement of changes in equity 115 members, and other employees 5. Company name, operations, and headcount 116 Employee share-ownership plans 140 6. Accounting principles for the consolidated 10.18 Receivables and commitments with financial statements 116 respect to related parties 142 7. Risk-assessment and risk-management 10.19 Own shares 142 principles 123 10.20 Maturity structure of financial instruments 143 8. Use of hedge accounting 127 10.21 Breakdown of assets and liabilities by Swiss 9. Significant events and and foreign domicile 144 events taking place after the closing date 128 10.22 Breakdown of assets by country/country group 10. Notes to the consolidated balance sheet 129 based on domicile 145 10.1 Repurchase and reverse repurchase agreements 129 10.23 Breakdown of assets by solvency of the country 10.2 Risk mitigants for loans and group in which the risk is domiciled 145 off-balance-sheet transactions 10.24 Breakdown of assets and liabilities by currency 146 Impaired loans 129 11. Notes to off-balance-sheet transactions 147 10.3 Trading portfolio assets and liabilities 11.1 Contingent liabilities Other financial assets and liabilities at fair value 130 Contingent receivables 147 10.4 Derivative financial instruments 131 11.2 Confirmed credits 147 10.5 Financial investments 132 11.3 Fiduciary transactions 147 10.6 Non-consolidated holdings 132 11.4 Assets under management 148 10.7 Companies in which the Group has a significant 12. Notes to the consolidated long-term direct or indirect holding 133 income statement 149 10.8 Tangible fixed assets 134 12.1 Net interest income before 10.9 Intangible assets 136 loan impairment charges/reversals 149 10.10 Other assets and liabilities 135 12.2 Fees and commissions on securities 10.11 Assets pledged or assigned as collateral for own and investment transactions 149 liabilities, and assets with reservation of title 135 12.3 Fees and commissions on other services 149 10.12 Commitments relating to own occupational 12.4 Net trading income and fair-value adjustments 150 pension funds 12.5 Personnel costs 150 BCV shares held by own occupational 12.6 Other operating expenses 150 pension funds 136 12.7 Depreciation and amortization of fixed assets 10.13 Economic situation of own occupational and impairment on equity investments 151 pension funds 136 12.8 Other provisions and losses 151 12.9 Extraordinary income 151
104 2019 Annual Report 105 Financial Statements
12.10 Extraordinary expenses 151 Parent Company Financial Statements 164 12.11 Taxes 151 1. Balance sheet 164 12.12 Breakdown of operating profit by Swiss and 2. Income statement 166 foreign origin 152 3. Statement of changes in equity 167 12.13 Earnings per share 152 4. Parent company name and 13. Other information 153 accounting principles 168 13.1 Regulatory capital requirements 153 5. Notes to the balance sheet 169 13.2 Business sector information 154 6. Notes to off-balance-sheet transactions 185 13.3 Consolidated income statement – 7. Notes to the income statement 186 5-year overview 158 8. Proposal by the Board of Directors 189 13.4 Consolidated balance sheet – 5-year overview 159 Statutory auditor’s report on the audit of the parent company financial statements 190 Statutory auditor’s report on the audit of the consolidated financial statements 160
104 2019 Annual Report 105 Financial Statements Report on the Consolidated Financial Statements
Balance sheet growth Assets in CHF billions 1. Assets 47.9 48.4 45.4 44.1 Total assets expanded 1% (+CHF 489m) year on year, 43.4 8.2 8.4 amounting to CHF 48.4bn at 31 December 2019. 8.0 6.9 7.5 2.2 1.4 1.7 1.5 5.8 Cash and cash equivalents, which consist primarily of 2.1 5.7 4.8 deposits held with the Swiss National Bank, increased 2% 4.9 4.8 (+CHF 149m) to CHF 8.4bn.
Amounts due from banks and reverse repurchase agreements decreased 36% (–CHF 810m) to CHF 1.4bn. 24.5 25.0 25.4 26.1 27.0
Total loans outstanding were up 3% (+CHF 1bn) to CHF 32.8bn: mortgage lending grew 4% (+CHF 937m) to CHF 27bn, while other loans were up 1% (+CHF 75m) to CHF 5.8bn. 3.1 3.2 3.8 3.8 3.8 1.9 1.8 1.9 1.9 2.0 2015 2016 2017 2018 2019 Cash and cash equivalents Due from banks and reverse repurchase agreements Loans and advances to customers Mortgage loans Financial investments Miscellaneous assets
Total impaired loans fell to CHF 193m. Impaired loans Impaired loans accounted for 0.5% of total lending, testifying to the quality in CHF billions and resilience of the Bank’s loan book. 0.23 0.23 0.24 0.21 0.19
2015 2016 2017 2018 2019
106 2019 Annual Report 107 Financial Statements – Report on the Consolidated Financial Statements
Continued rise in liabilities Liabilities and shareholders’ equity in CHF billions 2. Liabilities 47.9 48.4 45.4 3.2 44.1 4.5 43.4 2.7 Liabilities amounted to CHF 44.8bn at 31 December 2019, a 3.0 2.9 year-on-year increase of 1% (+CHF 425m).
Amounts due to banks and repurchase agreements fell 28% (–CHF 1.3bn) to CHF 3.2bn. 28.9 29.2 30.5 31.4 33.0 Customer deposits were up 5% (+CHF 1.7bn) to CHF 33.0bn.
Long-term borrowings declined 2% (–CHF 150m) to CHF 7.1bn. 6.9 7.3 7.4 7.2 7.1 1.3 1.3 1.3 1.3 1.4 3.4 3.4 3.5 3.5 3.6 2015 2016 2017 2018 2019 Due to banks and repurchase agreements Customer deposits Long-term borrowings Miscellaneous liabilities Shareholders’ equity
Solid financial position Capital ratio1 total capital as a % 3. Shareholders' equity 18.4 17.6 17.3 17.2 17.3 Total shareholders’ equity increased CHF 64m to CHF 3.6bn. The allocation of CHF 363m in net profit for the year was offset by the payout of CHF 301m approved at the Annual Shareholders’ Meeting in May 2019. 2015 2016 2017 2018 2019 At year-end, the CET1 ratio was at a comfortable level of 1) To facilitate like-for-like comparison, the ratios for 17.1% and the total capital ratio was 17.3%. These ratios, 2015 and 2016 have been recalculated without subtracting the countercyclical buer from regulatory capital, in accordance calculated according to the Internal Ratings-Based (IRB) with FINMA Circular 2016/1 “Disclosure − banks” approach, attest to the Bank’s financial solidity. Leverage ratio The leverage ratio stood at 6.3% at 31 December 2019, as % markedly above the regulatory requirement of 3%. 6.7 6.6 6.5 6.2 6.3
2015 2016 2017 2018 2019
106 2019 Annual Report 107 Financial Statements – Report on the Consolidated Financial Statements
Continued new fund inflows Assets under management 97.8 in CHF billions 5.7 88.0 87.6 4. Assets under management 85.4 86.5 6.0 5.2 5.5 5.8 The Group’s assets under management rose 12% to CHF 97.8bn. Net new money totaled CHF 3.8bn. This figure comprised CHF 1.5bn in fund inflows from personal banking customers and Vaud SMEs as well as CHF 2.3bn from large-corporate and institutional clients.
Assets under management 82.0 79.9 80.7 82.4 92.2 by currency
CHF 81% USD 10% EUR 6% Other 3%
Assets under management 2015 2016 2017 2018 2019 by investment type Piguet Galland & Cie SA Cash and cash equivalents 31% Parent company, Gérifonds, GEP Investment funds 26% Equities 21% Other 12% Bonds 10% Revenues in CHF millions
1026 1002 Revenues higher despite negative- 967 967 977 interest-rate environment
5. Revenues 490 478 478 490 507
Total BCV Group revenues rose 3% year on year to CHF 1.0bn.
The various revenue streams contributed as follows: • In an environment marked by continued negative interest rates, interest income before loan impairment charges/ 332 308 316 317 323 reversals was steady at CHF 497m. Net interest income grew 3% to CHF 507m, driven by a net reversal of loan 151 139 134 128 128 provisions. 53 42 39 41 44 2015 2016 2017 2018 2019 Net interest income Net fee and commission income Net trading income and fair-value adjustments Other ordinary income
108 2019 Annual Report 109 Financial Statements – Report on the Consolidated Financial Statements
• Fee and commission income was up 2% to CHF 323m. Revenues breakdown as a % • Trading income, which comes primarily from customer- 100% 100% 100% 100% 100% driven activities, was flat at CHF 128m.
• Other ordinary income rose 8% (+CHF 3m) to CHF 44m. 48% 49% 49% 50% 51%
32% 32% 33% 33% 32%
15% 14% 14% 13% 13% 5% 4% 4% 4% 4% 2015 2016 2017 2018 2019 Net interest income Net fee and commission income Net trading income and fair-value adjustments Other ordinary income Continued firm cost control 6. Operating expenses, depreciation, and amortization Operating expenses, depreciation, and amortization Total operating expenses rose 1% (+CHF 4m) to CHF 504m. in CHF millions
590 Personnel costs were up 2% (+CHF 7m) to CHF 339m, due 581 579 569 576 largely to the insourcing of IT experts, and other operating expenses were down 1% (–CHF 2m) to CHF 165m.
Depreciation and amortization of fixed assets grew 4% 337 338 337 333 339 (+CHF 3m) to CHF 71m as a result of investments in digital banking.
The cost/income ratio, which compares the sum of operating expenses, depreciation, and amortization (excluding goodwill amortization) with total income 177 171 171 167 165 (excluding loan impairment charges/reversals) was steady at 57.7%.
76 72 70 69 71
2015 2016 2017 2018 2019 Personnel costs Other expenses Depreciation and amortization
108 2019 Annual Report 109 Financial Statements – Report on the Consolidated Financial Statements
Operating profit and net profit up Operating and net profit in CHF millions 7. Operating profit 419 399 403 383 387 363 As a result of the rise in revenues and continuing firm cost 350 336 control, operating profit was up 4% to CHF 419m. 320 310 8. Net profit
Net profit rose 4% to CHF 363m, reflecting higher operating profit and lower tax expense following the implementation of Vaud Canton’s corporate tax reform.
2015 2016 2017 2018 2019 Operating profitNet profit
110 2019 Annual Report 111 Financial Statements Consolidated Financial Statements
1. Balance sheet (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change Notes absolute as % Cash and cash equivalents 8 384 8 235 149 2 Due from banks 1 186 1 921 – 735 – 38 Reverse repurchase agreements 10.1 239 314 – 75 – 24 Loans and advances to customers 10.2 5 752 5 677 75 1 Mortgage loans 10.2 27 016 26 079 937 4 Trading portfolio assets 10.3 277 334 – 57 – 17 Positive mark-to-market values of derivative financial instruments 10.4 273 268 5 2 Other financial assets at fair value 10.3 784 621 163 26 Financial investments 10.5/10.7 3 811 3 767 44 1 Accrued income and prepaid expenses 85 80 6 7 Non-consolidated holdings 10.6/10.7 69 70 – 1 – 2 Tangible fixed assets 10.8 433 445 – 12 – 3 Intangible assets 10.9 5 9 – 3 – 39 Other assets 10.10 36 42 – 7 – 16 Assets 10.20/10.21/10.22/10.24 48 352 47 863 489 1 Total subordinated assets 0 0 0 0 of which subject to mandatory conversion and/or conditional write-off 0 0 0 0
Due to banks 1 703 2 655 – 952 – 36 Repurchase agreements 10.1 1 502 1 809 – 307 – 17 Customer deposits 33 048 31 375 1 673 5 Trading portfolio liabilities 10.3 2 0 1 326 Negative mark-to-market values of derivative financial instruments 10.4 213 236 – 23 – 10 Other financial liabilities at fair value 10.3/10.14 918 766 152 20 Medium-term notes 3 7 – 4 – 54 Bonds and mortgage-backed bonds 10.14/10.15 7 094 7 244 – 150 – 2 Accrued expenses and deferred income 154 156 – 2 – 2 Other liabilities 10.10 114 77 37 47 Provisions 10.16 16 15 1 5 Liabilities 10.20 44 766 44 341 425 1 Reserves for general banking risks 10.16 701 701 0 0 Share capital 86 86 0 0 Capital reserve 35 35 0 1 Retained earnings 2 419 2 371 48 2 Currency translation reserve – 2 – 1 – 0 – 5 Own shares – 18 – 20 2 9 Minority interests in equity 0 0 – 0 – 11 Net profit 363 350 13 4 of which minority interests 0 0 0 27 Shareholders' equity 3 586 3 522 64 2 Total liabilities and shareholders’ equity 10.21/10.24 48 352 47 863 489 1 Total subordinated liabilities 0 0 0 0 of which subject to mandatory conversion and/or conditional write-off 0 0 0 0
110 2019 Annual Report 111 Financial Statements – Consolidated Financial Statements
Consolidated off-balance-sheet transactions 31 / 12 / 19 31 / 12 / 18 Change Change (in CHF millions) Notes absolute as % Contingent liabilities 10.2/11.1 1 789 1 863 – 74 – 4 Irrevocable commitments 10.2 1 301 1 623 – 321 – 20 Commitments relating to calls on shares and other equity securities 10.2 177 177 0 0 Confirmed credits 10.2/11.2 46 49 – 2 – 5
112 2019 Annual Report 113 Financial Statements – Consolidated Financial Statements
2. Income statement (in CHF millions)
2019 2018 Change Change Notes absolute as % Interest and discount income 570.3 573.1 – 2.7 – 0 Interest and dividend income from financial investments 27.9 31.0 – 3.1 – 10 Interest expense – 101.4 – 108.0 – 6.7 – 6 Net interest income before loan impairment charges/reversals 12.1 496.9 496.1 0.8 0 Loan impairment charges/reversals 9.8 – 5.9 – 15.8 – 265 Net interest income after loan impairment charges/reversals (NII) 506.7 490.1 16.6 3
Fees and commissions on securities and investment transactions 12.2 259.4 250.2 9.2 4 Fees and commissions on lending operations 44.5 46.1 – 1.6 – 4 Fees and commissions on other services 12.3 73.6 72.6 1.0 1 Fee and commission expense – 54.6 – 51.7 2.9 6 Net fee and commission income 322.9 317.2 5.7 2
Net trading income and fair-value adjustments 12.4 128.1 128.1 0.1 0
Gains/losses on disposals of financial investments 0.5 2.1 – 1.6 – 76 Income from equity investments 13.7 11.9 1.8 15 of which other non-consolidated holdings 13.7 11.9 1.8 15 Real-estate income 7.5 7.5 0.0 0 Miscellaneous ordinary income 22.9 20.0 2.9 15 Miscellaneous ordinary expenses – 0.3 – 0.3 0.0 8 Other ordinary income 44.3 41.1 3.2 8
Total income from ordinary banking operations 1 002.0 976.5 25.5 3
Personnel costs 12.5 – 339.3 – 332.7 6.6 2 Other operating expenses 12.6 – 165.2 – 167.5 – 2.2 – 1 Operating expenses – 504.5 – 500.2 4.3 1
Depreciation and amortization of fixed assets and impairment on equity investments 12.7 – 71.3 – 68.8 2.6 4 Other provisions and losses 12.8 – 7.2 – 4.7 2.5 54 Operating profit 12.12 418.9 402.9 16.0 4
Extraordinary income 12.9 0.7 34.9 – 34.2 – 98 Extraordinary expenses 12.10 – 0.2 – 0.0 0.2 637 Taxes 12.11 – 56.6 – 88.1 – 31.6 – 36 Net profit 362.9 349.7 13.2 4 Minority interests – 0.0 – 0.0 0.0 27 Net profit attributable to BCV shareholders 362.9 349.7 13.2 4
112 2019 Annual Report 113 Financial Statements – Consolidated Financial Statements
3. Cash flow statement(in CHF millions)
2019 2018 Source of Use of Net cash Source of Use of Net cash funds funds inflow / funds funds inflow / Notes outflow outflow Net profit for the year 363 350 Reserves for general banking risks Depreciation and amortization of fixed assets and impairment on equity investments 12.7 71 69 Provisions and other impairment charges/reversals 10.16 6 0 3 1 Loan impairment charges/reversals 10.16 12 22 22 16 Accrued income and prepaid expenses 6 12 Accrued expenses and deferred income 2 16 Extraordinary income: impairment reversals on fixed assets and disposals of tangible fixed assets and equity holdings 34 Dividend for the previous year 301 198 Cash flow from operations 452 331 121 455 265 190 Distribution drawn from paid-in reserves 86 Own shares 24 22 26 27 Change in scope of consolidation, minority interests, and currency translation differences Cash flow from equity transactions 24 22 2 26 113 – 86 Non-consolidated holdings 10.6 1 0 1 Real estate 10.8 2 106 4 Computer programs 10.8 47 52 Other tangible fixed assets 10.8 7 7 Intangible assets 10.9 Cash flow from investments 1 56 – 55 106 64 42
Cash flow from banking operations Due to banks Customer deposits Medium-term notes 4 8 Long-term borrowings 10.15 1 176 1 325 857 1 005 Other liabilities 35 26 Due from banks Loans and advances to customers 80 234 Mortgage loans 937 673 Financial investments 339 85 Other receivables 7 15 Medium- and long-term operations (over 1 year) 1 556 2 347 – 791 957 1 946 – 989 Due to banks 952 1 257 Repurchase agreements 307 460 Customer deposits 1 673 863 Trading portfolio liabilities 1 0 Negative mark-to-market values of derivative financial instruments 23 31 Other financial liabilities at fair value 152 46 Due from banks 735 908 Reverse repurchase agreements 75 185 Loans and advances to customers 12 608 Trading portfolio assets 57 148 Positive mark-to-market values of derivative financial instruments 5 14 Other financial assets at fair value 163 32 Financial investments 383 98 Short-term operations 2 704 1 833 871 2 843 1 809 1 033 Cash and cash equivalents 149 – 149 191 – 191 Total 4 738 4 738 0 4 387 4 387 0
A net positive amount represents a cash inflow, while a net negative amount represents a cash outflow.
114 2019 Annual Report 115 Financial Statements – Consolidated Financial Statements
4. Statement of changes in equity (in CHF millions)
Share Capital Retained Reserves Currency Own shares Equity Net profit Total capital reserve earnings for general translation - minority for the year equity banking reserve interests risks Status at 1 January 2017 86 207 2 137 701 – 2 – 19 0 310 3 420 2016 dividend – 198 – 198 Special dividend – 86 – 86 Retained earnings 112 – 112 0 Purchases of own shares (at cost) – 29 – 29 Disposals of own shares (at cost) 29 29 Gain on disposals of own shares and dividends 0 0 Effect of exchange-rate differences 0 0 Changes in scope and/or minority interests – 0 – 0 – 0 Net profit for the year 0 320 320 Status at 31 December 2017 86 121 2 249 701 – 1 – 19 0 320 3 457 2017 dividend – 198 – 198 Special dividend – 86 – 86 Retained earnings 122 – 122 0 Purchases of own shares (at cost) – 27 – 27 Disposals of own shares (at cost) 26 26 Gain on disposals of own shares and dividends 0 0 Effect of exchange-rate differences – 0 – 0 Changes in scope and/or minority interests – 0 – 0 Net profit for the year 0 350 350 Status at 31 December 2018 86 35 2 371 701 – 1 – 20 0 350 3 522 2018 dividend – 301 – 301 Retained earnings 48 – 48 0 Purchases of own shares (at cost) – 22 – 22 Disposals of own shares (at cost) 24 24 Gain on disposals of own shares and dividends 0 0 Effect of exchange-rate differences – 0 – 0 Changes in scope and/or minority interests – 0 – 0 Net profit for the year 0 363 363 Status at 31 December 2019 86 35 2 419 701 – 2 – 18 0 363 3 586
114 2019 Annual Report 115 Financial Statements – Consolidated Financial Statements
5. Company name, operations, and headcount 6. Accounting principles for the consolidated financial statements 5.1 Company name, legal status, and head office 6.1 Basis of preparation of consolidated financial Banque Cantonale Vaudoise (BCV) was founded on 19 statements December 1845 by the Vaud Cantonal Parliament as a société anonyme de droit public (i.e., a corporation The consolidated financial statements of BCV Group have organized under public law). Its legal status is defined in been prepared in accordance with the Swiss Federal Act of the Cantonal Act Governing the Organization of Banque 8 November 1934 on Banks and Savings Institutions, the Cantonale Vaudoise (LBCV) of 20 June 1995, and its head corresponding Ordinance of 30 April 2014 and the Swiss office is in Lausanne. Accounting Rules for Banks, Securities Dealers, Financial Groups and Conglomerates of 27 March 2014 (FINMA 5.2 Overview of operations Circular 2015/1). The financial statements give a true and fair view of the assets, financial position, and results of BCV BCV operates as a full-service bank with a community focus. Group. Its corporate mandate is to contribute to the economic development of its home region, the Canton of Vaud. The consolidated financial statements are based on Group companies’ full-year accounts, which are prepared in It offers a full range of services in retail banking, wealth accordance with generally accepted accounting principles. management, corporate banking, and trading. Along with The accounts are closed at 31 December of every year. its traditional areas of business (savings & loans and wealth management), BCV engages in large-corporate financing 6.2 Scope of consolidation and selected trade-financing operations in commodities (primarily softs and metals). It offers a broad portfolio of Companies over which BCV has control and companies financial-market services, including equity and derivatives in which it has significant influence over their operations trading and fixed-income instruments. The Bank is also are fully consolidated. Significant influence is generally active in foreign-exchange trading and in developing and recognized by BCV when it makes a profit on and bears the issuing structured products. risks of a company’s operations.
BCV is the parent company of a banking and financial Companies over which BCV has significant influence but no group, which encompasses a private bank and three fund outright control (holdings of 20%-50%) are accounted for management companies. The Bank also has a branch in using the equity method. Guernsey (Banque Cantonale Vaudoise Guernsey Branch), which is active in structured products. The following companies are not included in the scope of consolidation: 5.3 Headcount • Holdings of no material significance in terms of financial reporting and risk Full-time equivalents 31 / 12 / 19 31 / 12 / 18 Group 1 921 1 896 • Significant holdings not acquired for strategic purposes of which parent company 1 729 1 700 and intended to be sold or liquidated within 12 months.
116 2019 Annual Report 117 Financial Statements – Consolidated Financial Statements
6.3 Basis of consolidation 6.4.5 Trading portfolio assets
Equity is consolidated using the acquisition method. The Trading portfolio assets include positions in equity acquisition cost of a holding is offset against the equity securities, debt securities, and precious metals and are held existing on the date on which control is transferred. in order to take advantage of market-price fluctuations. Goodwill is carried on the balance sheet under “Intangible assets.” These positions are carried at fair value with reference to the prices quoted on the most representative market. 6.4 Accounting and valuation principles 6.4.6 Positive mark-to-market values of derivative 6.4.1 Cash and cash equivalents financial instruments
Cash and cash equivalents comprise ordinary coins and Derivative financial instruments recorded at the balance- banknotes and assets held with the Swiss National Bank; sheet date are carried at fair value with reference to the they are carried at nominal value. prices quoted on the most representative market. For positions that are not traded on sufficiently liquid markets, 6.4.2 Due from banks fair value is determined using a valuation model. Any resulting positive mark-to-market values are recognized Amounts due from banks are carried at nominal value under this item. less any impairment, as set out in note 7.2 under “Risk- assessment and risk-management principles.” Mark-to-market values relating to transactions with the same counterparty and hedged by a netting agreement are 6.4.3 Reverse repurchase agreements carried on the balance sheet at net value.
Receivables from cash collateral related to reverse 6.4.7 Other financial assets at fair value repurchase agreements are carried at nominal value. Securities needed to hedge structured products issued by Reverse repurchase agreements are not recognized on BCV and recorded as a liability are carried under this line the balance sheet unless the ownership rights pass to the item. These positions are carried at fair value with reference Group. to the prices quoted on the most representative market. For positions that are not traded on sufficiently liquid markets, 6.4.4 Loans and advances to customers and Mortgage fair value is determined using a valuation model. loans 6.4.8 Financial investments Loans and advances to customers and Mortgage loans are carried at nominal value less any impairment, as set out Financial investments include securities and precious metals in note 7.2 under “Risk-assessment and risk-management acquired for medium- and long-term investment purposes, principles.” as well as equity securities held neither for trading nor as a long-term investment. Available-for-sale real estate acquired in connection with lending operations is also carried under this item.
116 2019 Annual Report 117 Financial Statements – Consolidated Financial Statements
Held-to-maturity interest-bearing securities are carried 6.4.11 Tangible fixed assets at cost, with premiums or discounts amortized over the remaining term of the instrument using the accrual method. Tangible fixed assets are carried at cost. Software developed Gains and losses arising from their sale or early redemption by the Bank for in-house use is carried at direct production are recorded proportionally up to the initial maturity date cost, and the corresponding income is recorded under of the securities. Any related loan impairment charges or “Miscellaneous ordinary income.” reversals are recorded on the income statement under the corresponding line item. Tangible fixed assets are depreciated on a straight-line basis over their estimated useful lives within the following limits: Interest-bearing securities not intended to be held until • Fifty years for real estate maturity, as well as equity securities and available-for-sale • Ten years for technical facilities real estate, are carried at the lower of cost or market value. • Five years for machinery, furniture, and fittings As a general rule, impairment charges and reversals on • Five years for computer software and hardware. these assets are recorded under “Miscellaneous ordinary expenses” or “Miscellaneous ordinary income.” Where Any depreciation recorded over an asset’s remaining impairment can be broken down into loan impairment and estimated useful life or additional write-downs made market-related impairment, loan impairment charges and subsequent to impairment reviews are charged to the reversals are recorded on the income statement under the income statement for the period, under “Depreciation and corresponding line item. amortization of fixed assets and impairment on equity investments.” 6.4.9 Accrued income and prepaid expenses These assets are reviewed annually for impairment. If there is This item mainly consists of accrued interest and other a decline in value or a change in the useful life, the carrying transitory assets. value of the asset is written down and the written-down value is depreciated over the remaining estimated useful life 6.4.10 Non-consolidated holdings of the asset.
Non-consolidated holdings comprise equity securities that 6.4.12 Intangible assets are held as a long-term investment, irrespective of voting rights. They also include the Group’s infrastructure-related Goodwill is carried on the balance sheet and amortized holdings, particularly joint ventures. They are carried at cost on a straight-line basis over its estimated useful life, up to a less any impairment. maximum of ten years.
These holdings are reviewed for impairment at each Goodwill is reviewed for impairment at each balance-sheet balance-sheet date, based on whether there is an indication date, based on whether there is an indication of a loss in of a loss in value. If there is such an indication, the Group value. In this case, the carrying value is reduced to the determines the realizable value of each asset. realizable value and the difference is charged to the income statement under “Depreciation and amortization of fixed The realizable value is the higher of the net fair value and assets and impairment on equity investments.” the value in use. The asset is written down if its carrying value exceeds its realizable value. In this case, the carrying 6.4.13 Other assets value is reduced to the realizable value and the difference is charged to the income statement under “Depreciation This item mainly comprises coupons, indirect taxes to be and amortization of fixed assets and impairment on equity recovered, and any positive offset account balances. investments.”
118 2019 Annual Report 119 Financial Statements – Consolidated Financial Statements
6.4.14 Due to banks 6.4.19 Other financial liabilities at fair value
Amounts due to banks are carried at nominal value. This item includes structured products without an interest rate component that are issued by the Bank, including 6.4.15 Repurchase agreements participation products (fractions of equity baskets) and yield-enhancement products. They are carried at fair value Commitments from cash collateral related to repurchase with reference to a quoted market price or a valuation agreements are carried at nominal value. model. Subsequent revaluations are recognized under “Net trading income and fair-value adjustments.” Repurchase agreements are carried on the balance sheet and valued in the same way as financial investments, provided 6.4.20 Medium-term notes that the Group continues to be the beneficial owner. Medium-term notes issued by the Bank for a term of 6.4.16 Customer deposits between two and eight years are carried at nominal value.
This item comprises all amounts due to non-bank 6.4.21 Bonds and mortgage-backed bonds customers, carried at nominal value. This item consists of borrowings from the Central 6.4.17 Trading portfolio liabilities Mortgage-Bond Institution of Swiss Cantonal Banks, as well as bonds issued by the Bank. They are carried at nominal Trading portfolio liabilities result from short positions in value; any discount or premium is recorded under accrued debt and equity securities that are established in order or deferred items and amortized over the term of the to take advantage of market price fluctuations. They are instrument under “Interest expense.” carried at fair value with reference to the prices quoted on the most representative market. This line item also includes yield-enhancement, participation and capital-protection structured products issued by the Securities borrowed to establish short positions are not Bank and containing an interest-rate component. recorded on the balance sheet insofar as BCV Group does not take ownership of the attached rights. For these structured products, the host instrument and the embedded derivatives are treated separately. The host 6.4.18 Negative mark-to-market values of derivative instrument is recorded under this line item at nominal financial instruments value as a debt issued by the Bank. Embedded derivatives are carried as either positive or negative mark-to-market Derivative financial instruments recorded at the balance- values. Subsequent variations are recognized under “Net sheet date are carried at fair value with reference to the trading income and fair-value adjustments.” prices quoted on the most representative market. For positions that are not traded on sufficiently liquid markets, Interest accrued in the interest-rate component is recorded fair value is determined using a valuation model. Any under “Interest expense” using the accrual method. resulting negative mark-to-market values are recognized under this line item. Positions in bonds and structured products issued by BCV are deducted from this item. Mark-to-market values relating to transactions with the same counterparty and hedged by a netting agreement are carried on the balance sheet at net value.
118 2019 Annual Report 119 Financial Statements – Consolidated Financial Statements
6.4.22 Accrued expenses and deferred income 6.4.27 Capital reserve
This item mainly consists of accrued interest, taxes due on The capital reserve comprises additional paid-in capital Group companies’ earnings and capital, and other transitory obtained through the issue of equity securities and the liabilities. exercise of conversion rights and options, along with gains and losses realized and dividends received on own shares. Direct tax is calculated in accordance with the matching principle and is recognized in the income statement under 6.4.28 Retained earnings “Taxes.” This line item represents capital accrued by the Group; it 6.4.23 Other liabilities consists primarily of appropriated retained earnings and the effect of changes in the scope of consolidation. This item mainly comprises coupons, indirect taxes to be paid, and any negative offset account balances. 6.4.29 Currency translation reserve
6.4.24 Provisions Exchange-rate differences resulting from the translation of Group company accounts denominated in foreign This line item includes provisions necessary for business currencies are recorded under this line item and not operations, provisions for hedging tangible and latent through profit or loss. risks of loss, credit-risk provisions for off-balance-sheet transactions, and provisions for deferred taxes. 6.4.30 Own shares
Deferred taxes are calculated based on differences between Own shares (i.e., registered shares of Banque Cantonale tax values and book values. They are recognized in the Vaudoise) are deducted from shareholders’ equity at cost. income statement under “Taxes.” Dividend payments and gains and losses on disposals are allocated directly to the capital reserve. 6.4.25 Reserves for general banking risks 6.4.31 Contingent liabilities To cover risks inherent in the banking business which are not already covered by specific provisions, the Group sets Contingent liabilities mainly comprise commitments aside “Reserves for general banking risks.” These reserves are to secure credits, issued in the form of bills of exchange, part of shareholders’ equity and are taxed or subject to a surety bonds and guarantees, including irrevocable letters deferred tax (see note 10.16 below). of credit, endorsements of re-discounted bills, advance payment guarantees, and similar facilities such as pledges in 6.4.26 Share capital favor of third parties.
This line item consists of the Bank’s share capital. This type of liability is contingent if, when the transaction is entered into, the main debtor has no debt towards a third party but may incur such debt at a later date.
120 2019 Annual Report 121 Financial Statements – Consolidated Financial Statements
6.4.32 Irrevocable commitments An economic liability arises if the Group decides or is obliged to participate in the financing of an underfunded This line item includes commitments to grant loans and pension fund, while an economic benefit arises if there is other services that are unused but firm and irrevocable a potential positive effect on future cash flows as a result at the balance-sheet date, together with payment of pension-fund overfunding. Moreover, in the case of commitments relative to depositor-protection schemes. overfunding, an economic benefit exists if there is a lawful intention to use the overfunding to reduce the employer’s 6.4.33 Commitments relating to calls on shares and contributions, to refund the contributions to the employer other equity securities by virtue of local legislation, or to use them for any economic purpose of the employer other than regulatory This line item includes commitments relating to calls on benefits. shares and other equity securities. 6.5 Changes to accounting principles 6.4.34 Confirmed credits No changes were made to the accounting principles in 2019. Commitments arising from deferred payments, as well as from acceptances and other confirmed credits, are included 6.6 Registration of business transactions under this line item. All transactions concluded up until the balance-sheet date 6.4.35 Pension-fund liabilities are recorded on the date they are concluded and are valued according to the above accounting principles. Pension-fund liabilities are understood to mean obligations arising under pension plans and pension funds which 6.7 Foreign-currency translation provide retirement, death, and disability benefits. Transactions in foreign currencies during the year are When preparing its year-end accounts, the Group translated at the exchange rates prevailing on the determines, for each pension fund, whether there are transaction date. any assets (benefits) or liabilities (obligations) other than the contribution benefits and related adjustments. This Assets and liabilities held in foreign currencies at the close assessment is based on the financial situation of the pension of the financial year are translated into Swiss francs at the funds as shown in their interim accounts at 30 September. exchange rates prevailing on that date, provided that they are not valued at their historical rates. Any liabilities are carried on the balance sheet under “Provisions,” while any economic benefit is carried under Foreign-exchange gains and losses, including unrealized “Other assets.” Any changes from the corresponding gains and losses on forward foreign-exchange contracts value in the previous financial year are recognized for each open at the balance-sheet date, are carried in the income pension fund under “Personnel costs.” statement. Balance-sheet items and off-balance-sheet transactions of foreign holdings are translated at year-end Adjusted contributions for the period are also carried under exchange rates set for the Group, with the exception of “Personnel costs.” shareholders’ equity invested in these holdings, which is translated at historical rates.
120 2019 Annual Report 121 Financial Statements – Consolidated Financial Statements
Income-statement items are translated at the average annual exchange rates set for the Group. Differences arising from the translation of shareholders’ equity and the income statement are recorded directly in shareholders’ equity.
Major currencies 2019 2018 in CHF Close Average Close Average Euro 1.0870 1.1123 1.1269 1.1521 U.S. dollar 0.9684 0.9858
6.8 Refinancing of trading positions
The cost of refinancing securities held in the trading portfolios is netted against interest and dividend income from these portfolios, and recorded under “Net trading income and fair-value adjustments.”
6.9 Rounding
The figures contained in the tables have each been properly rounded depending on the number of significant digits used for the table; this may result in discrepancies between listed column and row totals and the sum of individual column or row items.
122 2019 Annual Report 123 Financial Statements – Consolidated Financial Statements
7. Risk-assessment and risk-management principles Every position that entails credit risk is clearly assigned to one of these exposure categories. The Bank uses clearly 7.1 Introduction defined methods for determining exposure levels by exposure category. Overall or specific limits are set for The Board of Directors periodically analyzes the Bank’s financial, off-balance-sheet commercial, and OTC derivatives main risks. The analyses are based on the risk-management exposures. Limits are likewise set for settlement exposures processes and methods in place, and contain a forward- to bank counterparties. When positions are unwound looking evaluation of the risks to which BCV is exposed. through a simultaneous settlement system, such as CLS In these analyses, the Board of Directors takes into account (Continuous Linked Settlement), settlement risk is not the Bank’s existing control system for managing and considered. mitigating risks. For trade-finance activities, credit risk is closely linked to BCV’s risk-management objectives and approach are country risk in emerging markets. In order to monitor this presented in the Risk Management chapter. This section type of risk, the Bank analyzes and limits both its financial explains in more detail the principles that the Bank applies exposure (financial transfer risk) and non-financial exposure in assessing risks. (risk that a physical transaction will not be unwound), particularly with respect to emerging markets. 7.2 Credit risk 7.2.2 Internal counterparty default ratings 7.2.1 Exposure to credit risk The Bank considers a counterparty to be “in default” if one Credit risk arises from the possibility that a counterparty or more criteria are met (see definition of “in default” in might default on its financial obligations to the Bank. It note 7.2.5). Each counterparty is assigned a default rating corresponds to the default risk set out in FINMA Circular based on clearly defined models. Each default rating is 2015/1 and includes settlement risk. All forms of credit defined by an interval of default probabilities. Seven main commitments to bank and non-bank counterparties, ratings and 16 sub-ratings are used to classify counterparties whether on or off the balance sheet, represent a credit risk according to their risk of default. for the Bank. 7.2.3 Loss given default and expected loss The Bank distinguishes five types of exposure to credit risk: • Financial exposures, which are characterized by an Loss given default is the amount that the Bank stands to outflow of funds lose on a loan at the time that the counterparty defaults. • Off-balance-sheet commercial exposures, stemming from Loss given default is determined for each form of credit guarantees given by the Bank or obtained in respect of granted by taking into account the credit limit and the counterparties coverage ratio, which is the value of the risk mitigants • Exposures resulting from bilateral derivatives contracts expressed as a percentage of the limit. For this purpose, with positive mark-to-market values collateral is taken at market value (see note 7.2.4). • Exposures resulting from repos/reverse repos and securities lending/borrowing transactions For unimpaired loans (see note 7.2.5), the Bank estimates • Settlement exposures, which result from a time lag the amount that it expects to lose in an “average” year. This between when funds or securities are sent and when amount is called the expected loss. For credit exposures not funds or securities are received in exchange. relating to trade finance, the expected loss is determined by the probability of default (reflected in the counterparty default rating) and the loss given default. For trade- finance exposures, the expected loss is estimated for each transaction, using an approach based on Basel slotting criteria.
122 2019 Annual Report 123 Financial Statements – Consolidated Financial Statements
7.2.4 Market value of collateral 7.2.7 Provisions for credit risk
The Bank measures collateral on the basis of its market The purpose of credit-risk provisions is to recognize, at the value, provided a suitable market exists. Various valuation balance-sheet date, the expected loss on impaired loans and methods are used, depending on the characteristics of the on unimpaired loans with latent risks. collateral and the sources of information about it. Each item of collateral is clearly assigned to a valuation method. Provisions for impaired loans are determined individually for each counterparty. The provision calculation takes into More specifically, the market value for a real-estate asset account total credit exposures to the counterparty on and is the estimated price at which the asset would be likely off the balance sheet, the liquidation value of the collateral, to change hands on the measurement date, between market conditions, the quality of the counterparty’s knowledgeable, willing parties in an arm’s length transaction, management, and the counterparty’s ability and willingness after an appropriate marketing process. to honor its commitments.
Provided their value is below a set amount, single-family The liquidation value is the estimated net realizable value of homes, condominium apartments and income-generating the asset. It is calculated on the basis of the current market real estate are valued using hedonic pricing models or value of the asset, taking into account sell-by objectives, capitalization pricing models in collaboration with experts. current market conditions, and selling costs (including any Other types of real estate and real estate with values above costs of holding the asset until sale and transaction-related the set amount are valued by experts. costs).
7.2.5 Impaired loans Provisions for latent risks are recognized for counterparties representing a heightened credit risk. Heightened credit A loan is impaired when the counterparty is unlikely to be risks are identified for counterparties that are “reputed to able to meet its future credit obligations. The counterparty be in financial difficulty” and for country risk. is then “in default” and all its debts to the Bank are considered “non-performing.” A counterparty is classified as “reputed to be in financial difficulty” when the criteria for “in default” are not met, but A counterparty is “in default” when it is more than 90 days when the Bank considers there to be a high risk that part of past due on any material credit obligation to the Bank or its exposure to credit risk on the counterparty will not be when the Bank considers that the counterparty is unlikely recovered, or when a significant breach of contract on any to pay its credit obligations to the Bank in full. of the forms of credit extended to the counterparty by the Bank has occurred and has not been remedied without a 7.2.6 Overdue-interest loans temporary or permanent exemption being granted. These loans are not impaired because the Bank deems that the A loan is considered to be an “overdue-interest” loan when counterparty is still likely to be able to meet its future credit at least one of the following three criteria is met: obligations. • Advances and mortgage loans: interest and fees are more than 90 days past due Provisions for country risk are intended to cover potential • Current-account credits: the agreed credit limit has been losses from financial or non-financial exposures – relating exceeded owing to insufficient payments in respect of to the unwinding of transactions – in high-risk countries. interest and fees for more than 90 days • The credit has been called in by the Bank.
“Overdue-interest” loans are in principle impaired.
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7.2.8 Regulatory capital requirements for credit risk taken together as well as for the various sub-portfolios.
BCV has been applying the Foundation Internal Ratings- For all trading positions, the Bank uses static-portfolio stress Based (FIRB) approach to determine the regulatory capital scenarios to model short-term stress. Six-month scenarios requirements for a large part of its credit-risk exposure since are used for the nostro portfolio managed by the Asset 2009, having obtained approval from FINMA in December Management Department, analyzing cumulative results 2008. The scope of this approach is detailed in the Bank’s over that period. Basel III Pillar 3 Report. The International Standardized Approach (SA-BIS) is used for the remaining credit-risk Sensitivity measures are used to monitor local exposure to exposure. risks arising from trading positions (i.e., marginal variations in risk factors). For trading book portfolios, the main sensitivity 7.3 Market risk on the trading book measures used are delta, gamma, vega, theta, and rho.
Market risk arises from the possibility of losses on the Bank’s The Bank determines its capital requirements for market trading book as a result of changes in market parameters, risk using the Standardized Approach (SA-BIS). in particular the price and price volatility of the underlying security. Trading positions are positions in equities, fixed- 7.4 Market risk on the banking book income instruments, currencies, and precious metals. Positions in underlying instruments are classified as “simple” The Bank assesses market risk on positions in the banking positions, whereas positions in futures contracts, swaps, or book by measuring interest-rate risk and liquidity risk. options are classified as “derivative” positions. 7.4.1 Interest-rate risk on the banking book Each trading position is valued at the price quoted on a reference market or on the basis of price information Interest-rate risk on the banking book arises from calculated using a valuation model that incorporates mismatches between the size and terms (dates on which observable market parameters. interest rates are fixed) of asset and liability positions. It is attributable to movements in the yield curve and The Bank manages its market risk on the trading book by changes in customer behavior. These variations directly setting limits in terms of net portfolio value, value-at-risk affect the Bank’s interest income and the economic value (VaR), stress loss, and sensitivity measures (Greeks). of its share capital. For variable-rate positions (adjustable- rate mortgages, traditional savings deposits with no fixed VaR is a statistical measure. It is calculated with a 99% term, and sight deposits), models are used to reproduce as confidence interval. For a given time horizon, VaR faithfully as possible the pace and magnitude of changes in represents the distribution of results by showing the best customer interest rates according to the market rate. result among the worst 1% of possible results. It is measured at the portfolio and sub-portfolio levels. It is calculated on The Bank monitors two measures of loss arising from the basis of complete revaluations of positions by subjecting interest-rate risk on the balance sheet: them to past changes in the various market parameters. For • Loss of interest margin, which is both an economic loss trading positions, the liquidation horizon is one day. For the and an accounting loss; nostro (i.e., proprietary) portfolio managed by the Asset • Loss of economic value of share capital, which by Management Department, the liquidation horizon is six definition is not reflected in the accounts. months. Every month, the Bank calculates various measures of Stress-loss analyses are used to measure potential losses that interest-rate risk, which enable it to monitor the impacts are not taken into account by VaR analysis. Stress scenarios on the interest margin and the economic value of share seek to model the most adverse possible movements in risk capital: factors. Scenarios are determined for all trading positions • Static indicators: to monitor the economic value of
124 2019 Annual Report 125 Financial Statements – Consolidated Financial Statements
share capital, the Bank calculates the duration of share 7.5 Operational risk capital and the sensitivity of share capital to an interest- rate shock. To monitor the net interest margin, the Bank Operational risk arises from inadequacies or failures relating calculates interest-rate gaps by residual maturity. to processes, people, and information systems within or • Dynamic indicators: every month, the Bank prepares external to the Bank. It is a risk inherent in banking activities scenarios regarding interest rates and business volumes, and results from: combined with various hedging strategies. These dynamic • Erroneous or malicious behavior of employees, suppliers, simulations take into account customer behavior with bank counterparties, customers, or other parties external respect to interest rates in order to simulate the interest to the Bank margin and potential losses in circumstances that lie • Inadequate IT systems (applications, interfaces, and between a probable scenario and a stress scenario. For hardware) or communication systems (telephone, fax, each scenario, indicators showing the duration and value etc.) of share capital are calculated for several future dates to • Inadequate infrastructure measure the future exposure of share capital to interest- • Inadequate organization in terms of processes (methods, rate risk. These dynamic simulations are carried out for a procedures, organizational structure, etc.) or governance three-year horizon. (rules, policies, directives, manuals, etc.) • External incidents. 7.4.2 Liquidity risk The Bank monitors its exposure to operational-risk events Liquidity risk arises from the possibility that the Bank does using a classification with seven categories: not have the resources on hand to deal with the potential • Internal fraud outflow of funds that could occur at any time in view of the • External fraud liabilities that it holds and changes in its assets. This risk is • Incidents related to human resources, including determined by the pace of withdrawals, the concentration workplace safety of liabilities, the Bank’s ability to raise funds, and prevailing • Incidents linked to customer relations and commercial terms and conditions in the interbank and capital markets. practices • Losses of operating resources The Bank monitors its exposure to liquidity risk in the • Failure of information systems medium/long term, as well as in the short term, by • Incidents related to transaction and process management. preparing maturity schedules for on-balance-sheet exposures, by calculating balance-sheet ratios, and by An operational-risk event that has occurred is booked modeling the future structure of its balance sheet using directly as an outright loss. Provisions are recognized for dynamic simulations. When conducting these simulations, the additional costs expected but not yet incurred. The the Bank also calculates regulatory ratios – i.e., the liquidity Bank determines its regulatory capital requirements for coverage ratio (LCR) and the net stable funding ratio (NSFR) operational risk according to the Standardized Approach. – at different time horizons. These simulations enable the Bank to determine its long-term approach to funding, particularly as regards raising funds from the Central Mortgage-Bond Institution and on the bond market, as well as the size and composition of its liquidity reserve. The Bank also stress-tests its regulatory liquidity ratios.
126 2019 Annual Report 127 Financial Statements – Consolidated Financial Statements
8. Use of hedge accounting As the Bank uses linear hedging, there is a very close economic relationship between the underlying positions The Group uses derivatives as part of its asset- and liability- and the hedging instruments. For mortgage loans, the management strategy, primarily to hedge interest-rate risk. main difference between the hedging instrument and the These transactions are recognized as macro and micro underlying position is the interest rate, as the rate on the hedges, and net gains or losses after interest are recorded mortgage loans includes the Bank’s margin. under “Interest and discount income” or “Interest expense.” Changes in the fair value of hedging instruments are Hedges are tested for their effectiveness every quarter. The recognized in the offset accounts under “Other assets” or main aim of the test is to ensure that the nominal value of “Other liabilities.” the underlying positions is still at or above the nominal value of the hedging instrument. A forward-looking assessment Whenever derivatives are used for hedging purposes, of the hedging relationship is also conducted by measuring records are kept of the transactions, the objectives and how the economic value of the hedging instrument and the strategies of the Bank’s unit in charge of managing market hedged positions would be affected by a 100bp rise or fall in risk on the balance sheet, and the system used to monitor interest rates. To qualify as a hedge, the change in the value the effectiveness of the hedge. of the hedging instrument must offset the change in value of the underlying positions by between 80% and 125%. The hedging instruments used are almost exclusively interest-rate swaps (IRS), in which the Bank may be either Given that linear hedging is used, the hedges are unlikely the payer or the receiver; the large majority of these IRS is to be ineffective. In the event of an over-hedged position, denominated in Swiss francs. Micro hedges are used mainly the excess portion of the derivative financial instrument is to hedge the Bank’s long-term borrowings (i.e., its own treated as a trading portfolio asset and recorded under “Net bond issues or issues made through the Central Mortgage- trading income and fair-value adjustments.” Bond Bank) and financial investments. Macro hedges are used mainly to hedge fixed-term mortgages.
Micro hedges are used to reduce the risk on a clearly defined underlying position. The hedges have the same nominal value and the same maturity as the hedged position, although a large underlying position may require several hedges.
Most macro hedges are used to hedge mortgage loans. The hedging instruments mature during the same month that the terms of the underlying mortgage loans end.
In order to prevent any over-hedged positions, the nominal value of the underlying positions must be 10% higher than that of the hedging instrument in order to take account of any depreciation, impairment, early redemption, or repayment. When entering into a hedging relationship, the Bank draws up documents stipulating the designation of the hedging instrument and the underlying transaction or group of transactions, together with their main features. The type of risk hedged and the system for assessing the effectiveness of the hedge are also provided.
126 2019 Annual Report 127 Financial Statements – Consolidated Financial Statements
9. Significant events and events taking place after the closing date
9.1 Significant events
As well as legal proceedings brought by the trustee of the Fairfield Sentry feeder fund against Banque Piguet & Cie SA (now Piguet Galland & Cie SA) and BCV in the USA in August 2010, the trustee for Bernard L. Madoff Investment Securities LLC (BLMIS) filed another claim in the USA on 6 June 2012 against BCV and other financial institutions in Switzerland and abroad for USD 9.7m with regard to investors that redeemed their shares in Madoff funds via BCV. The Madoff trustee is seeking to recover funds transferred by BLMIS to the Fairfield Sentry feeder fund from investors who had received refunds in the two years prior to BLMIS’ bankruptcy. As both these legal actions overlap, there is no additional financial or legal risk. Consequently, and as stated in previous annual reports, no provision has been set aside except to cover BCV’s defense costs.
9.2 Events taking place after the closing date
To the Group’s knowledge, there was no event liable to have a material influence on the Group’s financial statements as at 5 March 2020, when the writing of this annual report was completed.
128 2019 Annual Report PB Financial Statements – Consolidated Financial Statements
10. Notes to the consolidated balance sheet
10.1 Repurchase and reverse repurchase agreements (in CHF millions) 31 / 12 / 19 31 / 12 / 18 Book value of claims arising from cash collateral pledged in connection with securities borrowing or reverse repurchase agreements1 239 314 Book value of liabilities arising from cash collateral received in connection with securities lending or repurchase agreements1 1 502 1 809 Book value of securities held for own account, lent or transferred as collateral in connection with securities borrowing or repurchase agreements 1 644 1 792 of which those that can be sold or repledged without restriction 1 644 1 792 Fair value of securities received as collateral in connection with securities lending and those received in connection with securities borrowing and under reverse repurchase agreements, which can be sold or repledged without restriction 264 346 of which securities repledged as collateral 0 0 of which sold securities 0 0
1) Before netting agreements
10.2 Risk mitigants for loans and off-balance-sheet transactions Impaired loans (in CHF millions)
Type of risk mitigant Mortgage Other Unsecured Total Loans and advances to customers 570 1 925 3 337 5 832 Mortgages 27 024 27 024 Residential real estate 21 812 21 812 Office and business premises 1 420 1 420 Commercial and industrial property 831 831 Other 2 961 2 961 Loans (before impairment charges/reversals) 31 / 12 / 19 27 594 1 925 3 337 32 856 31 / 12 / 18 26 646 1 856 3 347 31 850 Loans (after impairment charges/reversals) 31 / 12 / 19 27 586 1 925 3 258 32 768 31 / 12 / 18 26 639 1 856 3 261 31 756
Contingent liabilities 5 375 1 409 1 789 Irrevocable commitments 376 0 925 1 301 Commitments relating to calls on shares and other equity securities 177 177 Confirmed credits 46 46 Off-balance-sheet transactions 31 / 12 / 19 380 376 2 558 3 313 31 / 12 / 18 476 329 2 906 3 712
Gross Realization value Net Individual receivables of risk mitigants receivables impairment charge/reversal Impaired loans and off-balance-sheet commitments 31 / 12 / 19 193 – 97 96 88 31 / 12 / 18 236 – 138 99 91 Change (absolute) – 44 – 41 – 3 – 3 Change (as %) – 18 – 30 – 3 – 3
PB 2019 Annual Report 129 Financial Statements – Consolidated Financial Statements
10.3 Trading portfolio assets and liabilities Other financial assets and liabilities at fair value (in CHF millions)
Assets 31 / 12 / 19 31 / 12 / 18 Debt securities 164 144 of which listed 164 144 Equity securities 2 1 Commodities and precious metals 111 189 Trading portfolio assets 277 334 Debt securities 58 11 Structured products 1 0 Other 725 610 Other financial assets at fair value 784 621 Total 1 061 955 of which determined using a valuation model 0 0 of which securities eligible for repurchase agreements in accordance with liquidity regulations 70 85
Liabilities 31 / 12 / 19 31 / 12 / 18 Debt securities 1 0 of which listed 1 0 Equity securities 1 0 Other trading portfolio liabilities 0 0 Trading portfolio liabilities 2 0 Debt securities 0 0 Structured products 918 766 Other financial liabilities at fair value 918 766 Total 919 766 of which determined using a valuation model 83 62
130 2019 Annual Report 131 Financial Statements – Consolidated Financial Statements
10.4 Derivative financial instruments(in CHF millions)
Trading instruments Hedging instruments Positive Negative Value of Positive Negative Value of mark-to-market mark-to-market underlying asset mark-to-market mark-to-market underlying asset value value value value Swaps 15 26 910 183 124 6 349 Futures 145 Options (OTC) 1 0 82 Interest-rate instruments 15 26 1 137 183 124 6 349
Forward contracts and swaps 233 230 31 045 Options (OTC) 29 23 3 613 Foreign currencies and precious metals 261 253 34 659 0 0 0
Futures 16 Options (OTC) 28 26 210 Options (exchange traded) 1 9 Equity securities and indices 29 26 236 0 0 0
Futures 0 Other 0 0 0 0 0 0
Total 31 / 12 / 19 306 305 36 031 183 124 6 349 of which determined using a valuation model 57 49 – – – – 31 / 12 / 18 321 336 34 946 165 119 6 012 of which determined using a valuation model 114 102 – – – –
Positive Negative Value of mark-to-market mark-to-market underlying asset value value Breakdown Trading instruments 306 305 36 031 Hedging instruments 183 124 6 349 Total before netting agreements 31 / 12 / 19 489 429 42 380 31 / 12 / 18 486 454 40 958
Total after netting agreements 31 / 12 / 19 273 213 42 380 31 / 12 / 18 268 236 40 958 Change absolute 5 – 23 1 422 as % 2 – 10 3
Breakdown by counterparty Central clearing houses Banks and securities dealers Other clients Positive mark-to-market value (after netting agreements) 89 134 50
130 2019 Annual Report 131 Financial Statements – Consolidated Financial Statements
10.5 Financial investments (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Book value Fair value Book value Fair value Debt securities 3 728 3 841 3 681 3 784 of which securities intended to be held until maturity 3 721 3 833 3 673 3 776 of which securities available for sale 8 8 8 8 Equity securities 28 79 30 78 of which significant holdings (minimum of 10% of capital or voting rights) 4 4 6 6 Available-for-sale real estate 55 60 56 60 Financial investments 3 811 3 980 3 767 3 922 of which securities eligible for repurchase agreements in accordance with liquidity regulations 3 710 – 3 663 –
Counterparty breakdown by rating AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Not rated Total Book value of debt securities 3 510 6 8 1 203 3 728
The rating categories are based on Standard & Poor’s The Bank’s unrated positions (that is, where neither the ratings; they are used for the specific instruments to instrument nor the issuer has a rating) are in investment- which the Bank has subscribed. If an instrument is not grade debt securities issued by Swiss public-sector entities rated by Standard & Poor’s, then a rating from another or by Switzerland’s housing-construction bond issuer agency is used. Where there is no specific rating for a given (EGW/CCL). instrument, the issuer’s long-term rating is used, with the same order of rating agencies.
10.6 Non-consolidated holdings (in CHF millions)
Cost Accumulated Book value at Changes in Additions Disposals Impairment Book value at Market value impairment year-end allocation charges/ year-end charges/ or reversals reversals scope 2018 2019 2019 Holdings accounted for using the equity method – – – – Other equity holdings, unlisted 76 – 5 70 – 1 69 – Non-consolidated holdings 76 – 5 70 0 0 – 1 0 69 –
132 2019 Annual Report 133 Financial Statements – Consolidated Financial Statements
10.7 Companies in which the Group has a significant long-term direct or indirect holding
With the exception of the parent company, none of the Group companies is listed on a stock exchange.
Fully consolidated Group companies
31 / 12 / 19 Company name and headquarters Main business Capital % of share % of voting % of stake held capital held rights held directly /indirectly in millions as % as % as % Piguet Galland & Cie SA, Yverdon-les-Bains (Switzerland) Private bank CHF 24.4 99.7 99.7 99.7 / 0 Gérifonds SA, Lausanne Fund management CHF 2.9 100 100 100 / 0 Gérifonds (Luxembourg) SA, Luxembourg Fund management EUR 0.1 100 100 0 / 100 Société pour la gestion de placements collectifs GEP SA, Lausanne Fund management CHF 1.5 100 100 100 / 0
The scope of consolidation did not change relative to No companies are accounted for using the equity method. end-2018.
Main non-consolidated holdings
31 / 12 / 19 Company name and headquarters Main business Capital % of share % of voting % of stake held capital held rights held directly /indirectly in millions as % as % as %
Purchase, sale, and manage- Aduno Holding Ltd, Zurich ment of equity holdings CHF 25.0 4.8 4.8 4.8 / 0 Central mortgage-bond Institution of Swiss Central mortgage-bond Cantonal Banks Ltd, Zurich institution CHF 1 625.0 13.6 13.6 13.6 / 0 of which CHF 1.3 billion unpaid
NNH Holding AG, Zurich anc. newhome.ch AG, Zurich Property listing website CHF 0.1 8.6 8.6 8.6 / 0 Swiss stock exchange opera- tor and provider of payment SIX Group Ltd, Zurich and other services CHF 19.5 2.5 2.5 2.4 / 0.1 Société vaudoise pour le logement Property developer for (SVL) SA, Crissier (Switzerland) low-income housing CHF 2.0 45.0 45.0 45 / 0 Swiss Bankers Prepaid Services Ltd, Development and sale of Grosshöchstetten (Switzerland) prepaid cards CHF 10.0 3.2 3.2 3.2 / 0 Swiss mobile payment TWINT Ltd, Zurich system CHF 12.8 3.2 3.2 3.2 / 0
No changes were made to the main non-consolidated As the Bank’s holding in SVL is not material in terms of the holdings in 2019. consolidated financial statements, it is not included in the scope of consolidation. At end-2018, SVL had total assets of CHF 15m and equity of CHF 5m.
132 2019 Annual Report 133 Financial Statements – Consolidated Financial Statements
Main equity security positions held under “Financial investments”
31 / 12 / 19 Company name and headquarters Main business Capital % of share % of voting % of stake held capital held rights held directly /indirectly in millions as % as % as % Banque Cantonale du Jura SA, Porrentruy (Switzerland) Bank CHF 42.0 4.8 4.8 4.8 / 0 Purchase, sale, and manage- Romande Energie Holding SA, Morges ment of equity holdings in (Switzerland) the energy sector CHF 28.5 3.0 3.0 3.0 / 0
10.8 Tangible fixed assets (in CHF millions)
Cost Accumulated Book value at Changes in Additions Disposals Depreciation Book value at depreciation year-end allocation or and write-offs year-end and write-offs scope 2018 2019 Group premises 402 – 171 230 7 2 – 10 230 Other real estate 183 – 81 102 – 7 0 – 4 90 Furniture and fixtures 38 – 21 18 – 0 5 – 5 18 Computer programs 137 – 52 85 0 47 – 45 86 Other tangible fixed assets 197 – 187 10 0 2 – 4 8 Tangible fixed assets 957 – 512 445 0 56 0 – 68 433
10.9 Intangible assets (in CHF millions)
Cost Accumulated Book value at Changes in Additions Disposals Amortization Book value at amortization year-end allocation or and year-end and scope impairment impairment 2018 2019 Goodwill 47 – 38 9 – 3 5
134 2019 Annual Report 135 Financial Statements – Consolidated Financial Statements
10.10 Other assets and liabilities (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Other Other Other Other assets liabilities assets liabilities Offset accounts 0 54 0 39 Indirect taxes 19 9 23 10 Coupons/coupons and securities due 0 1 3 1 Settlement accounts 4 41 6 11 Miscellaneous assets and liabilities 12 9 10 16 Other assets and liabilities 36 114 42 77
10.11 Assets pledged or assigned as collateral for own liabilities, and assets with reservation of title (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Amount or Real Amount or Real book value liability book value liability of pledge of pledge Assets pledged or assigned to the Swiss National Bank 188 189 Mortgages pledged or assigned to Central Mortgage-Bond Institution of Swiss Cantonal Banks 8 148 5 335 7 498 5 509 Other 289 281 287 278 Total assets pledged or assigned 8 625 5 616 7 974 5 787
Assets with reservation of title 0 0 0 0
134 2019 Annual Report 135 Financial Statements – Consolidated Financial Statements
10.12 Commitments relating to own occupational pension funds BCV shares held by own occupational pension funds (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Customer deposits 217 187 Other liabilities 0 0 Total 217 187
BCV’s own occupational pension funds held no BCV shares at 31 December 2019.
10.13 Economic situation of own occupational pension funds (in CHF millions)
There were no employer contribution reserves at end-2019 or end-2018.
Economic benefit/liability Surplus / Economic benefit/liability Contributions Pension expenses included in and pension expenses deficit adjusted for “Personnel costs” the period 31 / 12 / 19 31 / 12 / 19 31 / 12 / 18 Change 2019 2019 2018 Employer-financed pension funds: “Fonds de prévoyance en faveur du personnel de la BCV”1 51.5 0 0 0 0.0 0.0 0.0 Pension funds with no surplus or defi- cit: “Caisse de pensions de la BCV” 0 0 0 36.1 36.1 35.5 Pension funds with surpluses: “Fondation de prévoyance complé- mentaire en faveur de l'encadrement supérieur de la BCV” 0.8 0 0 0 1.5 1.5 1.4 Total 52.4 0 0 0 37.7 37.7 37.0
1) Since the intention is not to apply the surpluses to reduce or refund the employer’s contributions, or for the employer to use them for any economic purpose other than regulatory benefits, there is no identifiable economic benefit to be recognized on the balance sheet The surplus or deficit of a pension fund is based on its unaudited interim accounts at 30 September 2019.
Pension funds Senior executives insured with the CP BCV are also BCV Group employees are members of the “Caisse de members of the “Fondation de prévoyance complémentaire pensions de la Banque Cantonale Vaudoise (CP BCV).” Its de la Banque Cantonale Vaudoise,” the purpose of which is purpose is to insure its members against the economic to insure its members against the economic consequences consequences of retirement, disability, and death by of retirement, disability, and death by guaranteeing guaranteeing benefits in accordance with the terms benefits in accordance with the terms of the pension-fund of the pension-fund regulations. It is a provider of the regulations. compulsory insurance introduced under the Federal Act on Occupational Retirement, Survivors’ and Disability The “Fonds de prévoyance en faveur du personnel de Pension Plans (LPP), and provides coverage in excess of the la BCV” is an employer-operated fund that assists BCV minimum LPP requirements. employees in dealing with the economic consequences of old age, disability, illness, and early retirement.
136 2019 Annual Report 137 Financial Statements – Consolidated Financial Statements
10.14 Issued structured products (in CHF millions)
Carrying value Single treatment Separate treatment Underlying risk of embedded derivative Recognized in Recognized in other Value of the Value of the Total trading portfolio financial liabilities host instrument derivative liabilities at fair value Interest-rate instruments – 0 6 – 0 6 Equity securities – 842 740 – 12 1 570 Foreign currencies – 67 4 0 71 Commodities and precious metals – 9 0 0 9 Total 31 / 12 / 19 – 918 750 – 12 1 656 31 / 12 / 18 – 766 753 – 89 1 430
All structured products issued by the Bank have a debenture component.
Single accounting treatment interest-rate component are each treated as two separate Structured products without an interest-rate component, positions. i.e., participation structured products (representing a fraction of an equity basket) and yield-enhancement For these structured products, the host instrument and structured products, issued by the Bank are each treated the embedded derivative(s) are treated separately. The host as a single position. They are recognized under “Other instrument is recorded under “Bonds” at nominal value financial liabilities at fair value,” and their fair value is based as a debt issued by the Bank. Embedded derivatives are on a quoted market price or a valuation model. Subsequent carried as either positive or negative mark-to-market values. revaluations are recognized under “Net trading income and Subsequent variations are recognized under “Net trading fair-value adjustments.” income and fair-value adjustments.”
Separate accounting treatment Interest accrued in the interest-rate component is recorded Yield-enhancement, participation, and capital-protection under “Interest expense” using the accrual method. structured products issued by the Bank and containing an
136 2019 Annual Report 137 Financial Statements – Consolidated Financial Statements
10.15 Bonds and mortgage-backed bonds (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Rate Year of issue Nominal value Maturity Group-held Amount outstanding 2.500% 2010 200 25.03.2020 15 185 1.625% 2011 125 30.11.2026 32 93 1.500% 2014 135 28.03.2024 3 132 0.500% 2016 150 13.12.2028 0 150 0.400% 2016 150 07.04.2031 0 150 0.500% 2017 150 12.07.2029 0 150 0.250% 2017 150 28.11.2025 0 150 Bond issues by BCV Lausanne1 1 060 51 1 009 982 of which subordinated bonds 0 0 0 0 Structured products issued by BCV Lausanne or the Guernesey branch (value of the host instrument) 750 753 Central mortgage-bond Institution of Swiss Cantonal Banks 5 335 5 509 Bonds and mortgage-backed bonds 7 094 7 244
1) None of these issues can be called in for redemption before the maturity date
Long-term borrowings by maturity 31 / 12 / 19 2020 2021 2022 2023 2024 2025-2031 Total Average rate Bond issues 185 132 693 1 009 1.1% Structured products 280 359 71 19 19 3 750 – 0.3% Central mortgage-bond Institution of Swiss Cantonal Banks 184 474 189 425 434 3 629 5 335 1.2% Total 648 833 260 444 585 4 324 7 094
Status at New issues Redemptions Net change in Status at year-end own securities year-end 2018 2019 Bond issues 982 27 1 009 Structured products 753 784 – 786 – 1 750 Central mortgage-bond Institution of Swiss Cantonal Banks 5 509 365 – 539 5 335 Total 7 244 1 149 – 1 325 26 7 094
138 2019 Annual Report 139 Financial Statements – Consolidated Financial Statements
10.16 Provisions Reserves for general banking risks (in CHF millions)
Status at Used as Changes in Currency Recoveries, New Releases Status at year-end allocated scope of translation overdue provisions credited to year-end consolidation differences interest charged to income income statement statement 2018 2019 Provisions for deferred taxes 1 – 0 1 Provisions for credit risk 1 4 6 Other provisions 13 – 5 – 0 0 2 – 0 9 Total provisions 15 – 5 0 – 0 0 6 – 0 16 Reserves for general banking risks1 701 701 Provisions for credit risk and country risk 94 – 7 0 0 11 12 – 22 88 of which provisions for impaired loans 91 – 7 11 10 – 22 83 of which provisions for latent risks 3 2 5
1) Reserves for general banking risks are taxable
138 2019 Annual Report 139 Financial Statements – Consolidated Financial Statements
10.17 Stock options and shares granted to members of the Board of Directors, Executive Board members and other employees Employee share-ownership plans
2019 2018 Shares Value Shares Value (in units) (in CHF) (in units) (in CHF) Members of the Board of Directors 0 0 0 0 Executive Board members 3 531 2 362 572 3 476 2 232 436 Other employees 26 024 10 644 799 25 795 10 455 899 Total 29 555 13 007 371 29 271 12 688 335
No stock options have been granted to members of the Board of Directors, Executive Board members, or other employees.
Employee share ownership The market prices used to calculate the number of shares Annual performance-based compensation will be those on 19 March 2020 and 11 May 2020 (see For Executive Board members and department heads, 30% above), so they were not known at the time this report of their annual performance-based compensation must be was published. As a result, the number of shares was taken in BCV shares with a lock-up period of five to ten calculated based on the closing market price on 5 March years. 2020, the date of the Board of Directors’ final decision on this compensation. Other employees receiving annual performance-based compensation of CHF 21,000 or more may opt for full Share-ownership plan payment in cash, or 70% in cash and 30% in BCV shares The Executive Board and other Group employees, with the with a lock-up period of three years. In the latter case, BCV exception of employees of Piguet Galland & Cie SA, were increases the portion of shares by 30%. given the opportunity to subscribe to the share-ownership plan in April 2019 on the following terms: Executive Board members are allocated their shares subject • The number of shares that may be purchased is to approval at the Shareholders’ Meeting. The number of determined by the level of responsibility inherent in the shares allocated will be calculated based on the closing employee’s position. market price on 11 May 2020, rounded up to the nearest • The subscription period ran from 14–26 March 2019. whole number. • The subscription price was set at CHF 650 per share, and the market price used was CHF 806 (closing price on 14 Other employees will receive their shares at the end March, the first day of the subscription period). of April 2020. The number of shares allocated will be calculated based on the closing market price on 19 March The amount shown in the above table corresponds to the 2020, rounded up to the nearest whole number. These number of shares subscribed multiplied by CHF 156, which employees have until 1 April 2020 to make their decision. is the difference between the market price of CHF 806 and As their decision was not known at the time this report the subscription price of CHF 650. was published, the amount shown in the above table corresponds to the maximum amount payable in the form of shares.
140 2019 Annual Report 141 Financial Statements – Consolidated Financial Statements
Long-term performance-based compensation At the beginning of each three-year share-ownership plan, participants are informed of the number of shares that will be allocated if all objectives are met in full. At the end of each plan, the Bank informs participants of the extent to which objectives have been met based on the Bank’s financial results and strategic and qualitative performance. The number of shares initially allocated is multiplied by the level of attainment of the objectives in order to determine the number of shares allocated to each participant.
The amounts shown in the table on the previous page correspond to the expense recorded in 2019 for the various plans in progress.
Free shares The Bank awards two BCV shares to trainees and university interns who successfully complete their training and are then hired by BCV.
The number allocated and their value, based on the market price on the last business day of the month before the shares are awarded, are also shown in the table.
140 2019 Annual Report 141 Financial Statements – Consolidated Financial Statements
10.18 Receivables and commitments with respect to related parties (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Receivable Commitment Receivable Commitment Significant shareholder 8 3 705 7 2 984 Affiliated companies 172 391 132 350 Governing bodies 33 11 19 10
Corporations organized under public law in Vaud Canton conducted on market terms. Receivables and commitments and public-private entities in which Vaud Canton has a with respect to Executive Board members were granted on qualified holding are considered affiliated companies. the standard terms for BCV employees. Transactions with Transactions with members of the Board of Directors were related parties were conducted on market terms.
10.19 Own shares
Number of shares (in units) Average Total Own transaction shares price Status at 1 January 2019 8 606 190 28 774 of which shares reserved for long-term performance-based compensation 13 200 Purchases 786 28 546 Sales 743 – 32 648 Status at 31 December 2019 8 606 190 24 672 of which shares reserved for long-term performance-based compensation 12 800
Own shares were traded at market prices. The proceeds of the sale of own shares were recognized under “Capital reserve.”
142 2019 Annual Report 143 Financial Statements – Consolidated Financial Statements
10.20 Maturity structure of financial instruments(in CHF millions)
Maturity Sight Callable up to 3 to 12 months over Fixed Total 3 months 12 months to 5 years 5 years assets Cash and cash equivalents 8 384 8 384 Due from banks 717 402 67 1 186 Reverse repurchase agreements 239 . 239 Loans and advances to customers 73 1 672 1 737 385 934 952 5 752 Mortgage loans 726 323 2 866 2 354 12 736 8 010 27 016 Trading portfolio assets 277 277 Positive mark-to-market values of derivative financial instruments 273 273 Other financial assets at fair value 784 784 Financial investments 497 37 199 2 055 968 55 3 811 Current assets 31 / 12 / 19 11 732 2 234 5 042 3 005 15 725 9 930 55 47 723 31 / 12 / 18 11 601 2 501 4 691 2 915 15 522 9 932 56 47 216
Due to banks 868 79 757 1 703 Repurchase agreements 1 229 273 1 502 Customer deposits 11 951 20 098 659 275 45 20 33 048 Trading portfolio liabilities 2 2 Negative mark-to-market values of derivative financial instruments 213 213 Other financial liabilities at fair value 918 918 Medium-term notes 1 1 2 3 Bonds and mortgage-backed bonds 286 362 2 122 4 324 7 094 Borrowed funds 31 / 12 / 19 13 951 20 176 2 932 910 2 169 4 344 44 483 31 / 12 / 18 14 839 18 335 3 804 723 1 827 4 565 44 092
142 2019 Annual Report 143 Financial Statements – Consolidated Financial Statements
10.21 Breakdown of assets and liabilities by Swiss and foreign domicile (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Swiss Foreign Swiss Foreign Cash and cash equivalents 8 383 2 8 231 4 Due from banks 674 512 1 254 668 Reverse repurchase agreements 239 314 Loans and advances to customers 5 050 703 4 936 742 Mortgage loans 27 015 0 26 078 1 Trading portfolio assets 254 23 313 21 Positive mark-to-market values of derivative financial instruments 129 144 154 114 Other financial assets at fair value 286 498 253 369 Financial investments 2 599 1 212 2 643 1 124 Accrued income and prepaid expenses 83 2 78 2 Non-consolidated holdings 69 1 70 1 Tangible fixed assets 433 0 445 0 Intangible assets 5 9 Other assets 35 0 42 0 Assets 45 015 3 336 44 505 3 357 Total as % 93 7 93 7
Due to banks 821 882 1 473 1 183 Repurchase agreements 1 229 273 1 659 150 Customer deposits 31 092 1 955 29 238 2 137 Trading portfolio liabilities 2 0 0 Negative mark-to-market values of derivative financial instruments 112 101 79 157 Other financial liabilities at fair value 795 123 633 133 Medium-term notes 3 7 Bonds and mortgage-backed bonds 6 948 146 7 101 143 Accrued expenses and deferred income 152 2 155 1 Other liabilities 114 74 3 Provisions 16 15 Reserves for general banking risks 701 701 Share capital 86 86 Capital reserve 35 35 Retained earnings 2 419 2 371 Currency translation reserve – 2 – 1 Own shares – 18 – 20 Minority interests in equity 0 0 Net profit 363 350 Total liabilities and shareholders’ equity 44 869 3 483 43 955 3 908 Total as % 93 7 92 8
144 2019 Annual Report 145 Financial Statements – Consolidated Financial Statements
10.22 Breakdown of assets by country/country group based on domicile (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Absolute value as % of total Absolute value as % of total Europe 2 528 5 2 541 5 France 650 1 614 1 United Kingdom 461 1 491 1 Germany 376 1 346 1 Luxembourg 341 1 333 1 Netherlands 171 0 166 0 Austria 130 0 174 0 Other 399 1 416 1 Asia 410 1 451 1 Latin America, the Caribbean 74 0 106 0 United States, Canada 134 0 97 0 Other 190 0 162 0 Foreign assets 3 336 7 3 357 7 Switzerland 45 015 93 44 505 93 Assets 48 352 100 47 863 100
10.23 Breakdown of assets by solvency of the country group in which the risk is domiciled (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Internal country rating Standard & Poor's rating Absolute value as % of total Absolute value as % of total 1&2 AAA to AA- 2 919 83 2 945 83 3 A+ to A- 214 6 224 6 4 BBB+ to BBB- 57 2 116 3 5 BB+ to BB- 12 0 57 2 6 B+ to B- 281 8 155 4 7 CCC+ to C 23 1 32 1 Not rated Not rated 27 1 12 0 Net foreign exposure 3 533 100 3 541 100
144 2019 Annual Report 145 Financial Statements – Consolidated Financial Statements
10.24 Breakdown of assets and liabilities by currency (in CHF millions)
CHF EUR USD Other Total Cash and cash equivalents 8 346 35 2 1 8 384 Due from banks 216 302 400 268 1 186 Reverse repurchase agreements 152 87 239 Loans and advances to customers 3 819 788 1 108 38 5 752 Mortgage loans 27 012 3 27 016 Trading portfolio assets 166 111 277 Positive mark-to-market values of derivative financial instruments 270 – 8 11 0 273 Other financial assets at fair value 289 165 221 109 784 Financial investments 3 056 754 0 0 3 811 Accrued income and prepaid expenses 75 8 2 0 85 Non-consolidated holdings 69 1 69 Tangible fixed assets 433 0 433 Intangible assets 5 5 Other assets 33 1 1 1 36 Positions carried as assets 43 789 2 201 1 833 528 48 352 Delivery claims arising from spot and forward transactions and options 10 031 6 703 13 168 3 450 33 352 Assets 31 / 12 / 19 53 821 8 904 15 001 3 978 81 704 31 / 12 / 18 55 031 8 644 13 926 3 075 80 676
Due to banks 740 126 623 214 1 703 Repurchase agreements 400 592 358 151 1 502 Customer deposits 29 190 1 656 1 760 441 33 048 Trading portfolio liabilities 2 2 Negative mark-to-market values of derivative financial instruments 177 28 7 1 213 Other financial liabilities at fair value 451 190 265 12 918 Medium-term notes 3 3 Bonds and mortgage-backed bonds 6 959 71 63 1 7 094 Accrued expenses and deferred income 146 3 4 0 154 Other liabilities 65 14 32 3 114 Provisions 8 3 5 16 Reserves for general banking risks 701 701 Share capital 86 86 Capital reserve 35 35 Retained earnings 2 419 2 419 Currency translation reserve – 2 – 2 Own shares – 18 – 18 Minority interests in equity 0 0 Net profit 363 363 Positions carried as liabilities 41 727 2 684 3 117 823 48 352 Delivery commitments arising from spot and forward transactions and options 12 011 6 290 11 994 3 043 33 337 Total liabilities and shareholders' equity 31 / 12 / 19 53 737 8 974 15 111 3 867 81 689 31 / 12 / 18 54 978 8 707 13 979 3 024 80 688
Net position by currency 31 / 12 / 19 83 – 70 – 110 112 15 31 / 12 / 18 53 – 63 – 53 51 – 13
146 2019 Annual Report 147 Financial Statements – Consolidated Financial Statements
11. Notes to off-balance-sheet transactions
11.1 Contingent liabilities Contingent receivables (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Irrevocable and similar guarantees 1 133 1 176 – 43 – 4 Other guarantees 656 688 – 32 – 5 Contingent liabilities 1 789 1 863 – 74 – 4
Contingent receivables 0 0 0 0
11.2 Confirmed credits (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Commitments arising from deferred payments 46 49 – 2 – 5
11.3 Fiduciary transactions (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Fiduciary investments with third parties 540 300 240 80 Fiduciary loans 1 1 – 0 – 0 Fiduciary transactions 541 301 240 80
146 2019 Annual Report 147 Financial Statements – Consolidated Financial Statements
11.4 Assets under management (in CHF millions)
Breakdown 31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Assets held by collective investment vehicles under own management 26 022 22 532 3 491 15 Assets under discretionary management agreements 17 305 14 883 2 421 16 Other assets under management 54 513 50 205 4 308 9 Total assets under management (incl. double-counted) 97 840 87 620 10 220 12 of which double-counted1 10 047 8 275 1 772 21
Change 31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Initial total assets under management (incl. double-counted) 87 620 86 490 1 130 1 Net fund inflows/outflows 3 833 4 001 – 168 – 4 Changes in prices, interest, dividends and exchange rates 6 388 – 2 871 9 259 – 322 Final total assets under management (incl. double-counted) 97 840 87 620 10 220 12
1) The 2018 figure for double-counted assets has been adjusted to include investment fund assets that are under management but not held at BCV
Assets under management Net new money All customer assets held or managed for investment Net new money, which is determined in accordance with purposes are included under “Assets under management.” the same scope as assets under management, is the sum As defined in the new Swiss accounting rules for banks, of inflows from new customers, outflows from departing assets under management mainly comprise customer customers, and movements in the assets of existing deposits in the form of savings and investments and term customers during the financial year. Changes in assets accounts, together with fiduciary investments and all under management resulting from price fluctuations, duly valued assets in custody accounts. Assets held for exchange-rate movements, interest and dividend payments, investment purposes by institutional investors, companies, and commissions and fees are not part of the net new and individual customers, along with investment fund money calculation. Nor does it include changes in assets assets, are included unless they are custody-only assets for under management resulting from the acquisition, disposal, which the Group provides only safekeeping and corporate- or closure of companies or complete business lines. action services. Deposits for which additional services are provided (such as investment management, advice and fund administration) also come under “Assets under management.”
148 2019 Annual Report 149 Financial Statements – Consolidated Financial Statements
12. Notes to the consolidated income statement
12.1 Net interest income before loan impairment charges/reversals (in CHF millions)
2019 2018 Change Change absolute as % Banks and reverse repurchase agreements 0.4 – 1.8 2.2 119 Customers 558.4 565.4 – 7.0 – 1 Interest and dividends on financial investments 27.9 31.0 – 3.1 – 10 Other interest income 11.5 9.5 2.1 22 Total interest income 598.2 604.1 – 5.9 – 1 Banks and repurchase agreements 20.4 16.8 3.6 21 Customers – 5.6 – 1.5 – 4.1 – 279 Medium-term notes and bonds 73.3 80.3 – 7.0 – 9 Other interest expense 13.3 12.4 0.9 7 Total interest expense 101.4 108.0 – 6.7 – 6 Net interest income before loan impairment charges/reversals 496.9 496.1 0.8 0
Negative interest paid by the Bank on its assets is deducted Negative interest received by the Bank on its liabilities is from interest and discount income. This negative interest deducted from interest expense. This negative interest totaled CHF 5.1m in 2019, against CHF 7.0m in 2018, and totaled CHF 42.6m in 2019, against CHF 38.3m in 2018, and relates mainly to deposits held with the Swiss National was earned on interbank positions, customer deposits, and Bank, interbank positions, and to a lesser extent funding transactions related to structured product issuance. transactions for trading positions.
12.2 Fees and commissions on securities and investment transactions (in CHF millions)
2019 2018 Change Change absolute as % Securities administration 42.5 41.0 1.5 4 Brokerage 33.4 32.7 0.7 2 Income from new issues 10.2 10.9 – 0.7 – 6 Management fees 56.3 51.5 4.8 9 Investment-fund operations 113.7 111.7 2.1 2 Other 3.2 2.4 0.8 36 Total 259.4 250.2 9.2 4
12.3 Fees and commissions on other services (in CHF millions)
2019 2018 Change Change absolute as % Payment cards, ATMs, transfers and checks 22.6 21.8 0.8 4 Administrative services for institutional clients, and statements 18.3 17.6 0.7 4 Account management fees 20.8 19.9 0.9 4 Document collection fees and bancassurance 7.0 8.2 – 1.2 – 15 Safe rentals, numbered accounts and mail holding services 4.9 5.1 – 0.2 – 3 Total 73.6 72.6 1.0 1
148 2019 Annual Report 149 Financial Statements – Consolidated Financial Statements
12.4 Net trading income and fair-value adjustments (in CHF millions)
2019 2018 Change Change Breakdown by business sector absolute as % Retail Banking 17.1 17.3 – 0.2 – 1 Corporate Banking 9.8 9.7 0.1 1 Wealth Management 20.7 20.8 – 0.1 – 0 Trading 46.0 41.5 4.5 11 Corporate Center 34.6 38.8 – 4.3 – 11 Total 128.1 128.1 0.1 0
Trading income and fair-value adjustments Fixed-income instruments (including funds) 2.1 0.9 1.2 134 Equity securities (including funds) 20.6 17.2 3.5 20 Currencies and precious metals 111.6 116.0 – 4.3 – 4 Total trading income and fair-value adjustments 134.4 134.1 0.4 0 of which fair-value adjustments 20.3 17.1 3.2 18 of which fair-value adjustments on assets 192.7 – 126.6 319.3 252 of which fair-value adjustments on liabilities – 172.4 143.7 – 316.1 – 220 Trading fee expense – 6.3 – 6.0 0.3 5 Net trading income and fair-value adjustments 128.1 128.1 0.1 0
12.5 Personnel costs (in CHF millions)
2019 2018 Change Change absolute as % Fixed and variable compensation 259.3 254.7 4.6 2 of which charges related to share-based compensation and other variable compensation (including the portion paid in cash) 39.1 37.1 2.1 6 Employee benefits 26.6 25.7 0.9 4 Contributions to staff pension funds 37.7 37.0 0.7 2 Other personnel expenses 15.7 15.3 0.3 2 Total 339.3 332.7 6.6 2
12.6 Other operating expenses (in CHF millions)
2019 2018 Change Change absolute as % Premises 22.3 22.6 – 0.3 – 1 IT 72.8 74.0 – 1.1 – 2 Machinery, furniture, vehicles, etc. 3.2 3.6 – 0.3 – 9 Office supplies 1.2 1.2 0.0 2 Telecommunications and shipping 6.2 7.5 – 1.2 – 16 Marketing and communications, gifts and subscriptions 18.3 17.3 0.9 5 Financial information 14.1 13.6 0.5 3 Auditor fees 2.5 2.4 0.0 2 of which for financial and prudential audits 2.2 2.2 0.0 0 of which for other services 0.2 0.2 0.0 22 Other professional fees 4.4 4.8 – 0.4 – 8 Payment transactions 10.4 10.5 – 0.1 – 1 Issuing fees 1.1 1.0 0.1 12 Miscellaneous operating expenses 8.7 8.9 – 0.3 – 3 of which charges for the guarantee by the Canton of Vaud1 0.3 0.3 – 0.0 – 7 Total 165.2 167.5 – 2.2 – 1
1) Limited guarantee by the Canton of Vaud for deposits with the Caisse d'Epargne Cantonale Vaudoise, and managed by BCV
150 2019 Annual Report 151 Financial Statements – Consolidated Financial Statements
12.7 Depreciation and amortization of fixed assets and impairment on equity investments(in CHF millions)
2019 2018 Change Change absolute as % Real estate 19.4 19.8 – 0.5 – 2 Computer programs 44.8 40.0 4.8 12 Other investments 3.8 4.3 – 0.6 – 13 Holdings 0.0 1.2 – 1.2 – 100 Goodwill 3.4 3.4 0.0 0 Total 71.3 68.8 2.6 4
12.8 Other provisions and losses (in CHF millions)
2019 2018 Change Change absolute as % Provisions for credit risk 4.4 0.3 4.1 n/a Miscellaneous provisions 1.7 2.6 – 0.9 – 35 Miscellaneous losses 1.1 1.8 – 0.7 – 39 Total 7.2 4.7 2.5 54
12.9 Extraordinary income (in CHF millions)
2019 2018 Change Change absolute as % Disposals of equity holdings 0.2 0.3 – 0.1 – 44 Disposals of tangible fixed assets1 0.0 33.9 – 33.9 n/a Other extraordinary income 0.6 0.8 – 0.2 – 23 Total 0.7 34.9 – 34.2 – 98
1) Proceeds from the sale of a piece of non-core real estate, which was finalized in 2018
12.10 Extraordinary expenses (in CHF millions) 2019 2018 Change Change absolute as % Miscellaneous extraordinary expenses 0.2 0.0 0.2 637 Total 0.2 0.0 0.2 637
12.11 Taxes (in CHF millions)
2019 2018 Change Change absolute as % Direct federal tax 29.2 27.9 1.3 4 Cantonal and municipal taxes 27.1 60.6 – 33.5 – 55 Foreign taxes 0.3 0.3 – 0.0 – 0 Deferred taxes – 0.0 – 0.7 – 0.7 – 96 Total 56.6 88.1 – 31.6 – 36 Weighted average tax rate, based on operating profit 13% 22%
Tax breakdown by country 2019 2018 Absolute Absolute value As % of total value As % of total Switzerland 56.2 99.4 87.8 99.6 Luxembourg 0.3 0.6 0.3 0.4 Total 56.6 100.0 88.1 100.0
150 2019 Annual Report 151 Financial Statements – Consolidated Financial Statements
12.12 Breakdown of operating profit by Swiss and foreign origin(in CHF millions)
2019 2018 Swiss Foreign Swiss Foreign Net interest income 506.7 0.0 489.6 0.5 Net fee and commission income 307.5 15.4 301.1 16.1 Net trading income 127.1 1.1 125.9 2.2 Other ordinary income 44.3 0.0 41.1 – 0.0 Total income from ordinary banking operations 985.5 16.5 957.7 18.8 Personnel costs 338.3 1.0 331.8 0.9 Other operating expenses 163.7 1.5 166.1 1.4 Operating expenses 502.0 2.5 497.9 2.3 Depreciation and amortization of fixed assets and impairment on equity investments 71.3 0.0 68.8 0.0 Other provisions and losses 7.2 4.7 Operating profit 404.9 14.0 386.4 16.5
12.13 Earnings per share
2019 2018 Net profit attributable to BCV Group shareholders (CHF millions) 362.9 349.7
Average number of shares in issue during the period (in units) 8 606 190 8 606 190 Average number of own shares held during the period (in units) – 29 586 – 31 673 Average number of outstanding shares during the period (in units) 8 576 604 8 574 517
Basic earnings per share (CHF) 42.31 40.78
There are no ongoing financial transactions that would dilute earnings per share.
152 2019 Annual Report 153 Financial Statements – Consolidated Financial Statements
13. Other information
13.1 Regulatory capital requirements (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Common Equity Tier 1 (CET1) capital 3 220 3 156 Instruments and reserves 3 294 3 240 Regulatory adjustments – 73 – 85
Additional Tier 1 (AT1) capital 0 0 Instruments 0 0 Regulatory adjustments 0 0
Tier 2 (T2) capital 23 22 Compulsory reserves in equities and general provisions 23 22 Regulatory adjustments 0 0
Total eligible capital 3 244 3 177
Risk-weighted assets Credit risk 16 226 15 911 Non-counterparty-related assets 567 580 Market risk 232 178 Operational risk 1 761 1 755 BIS required capital 18 786 18 423
BIS ratios CET1 ratio 17.1% 17.1% T1 ratio 17.1% 17.1% Total capital ratio 17.3% 17.2% Leverage Ratio 6.3% 6.2%
Liquidity ratios Liquidity Coverage Ratio (LCR) 129% 113% Net Stable Funding Ratio (NSFR)1 122% 122%
1) Ratio provided on a voluntary basis and calculated according to FINMA's most recent directive
In December 2008, the Bank obtained approval from In accordance with Basel III Pillar 3 disclosure requirements, FINMA to use the Basel Foundation Internal Ratings-Based the Bank publishes a report containing information on its approach to determine regulatory capital requirements for capital adequacy, risk-assessment methods, and the level of credit risk. It began applying this approach in 2009. risk taken. The report also gives information on the Group and parent-company leverage and liquidity ratios.
The report is available in the Investor Relations section of the BCV website.
152 2019 Annual Report 153 Financial Statements – Consolidated Financial Statements
13.2 Business sector information Transfer Pricing, or FTP, method).
13.2.1 Methodology In an environment marked by continued negative interest Results by business sector are presented at BCV Group level rates, commercial margins on accounts in Swiss francs are and are broken down according to the Bank’s activities. calculated with a minimum of zero for our retail, private banking, and corporate clients (except Large Corporates Retail Banking covers operations with retail customers and Trade Finance). who have up to CHF 250,000 in assets or a mortgage loan worth up to CHF 1.2m. It also includes the Digital and For the Corporate Center, net interest income before loan Multichannel Banking Department, which works to expand impairment charges/reversals comprises the net gain/loss the Bank’s digital offering. on asset and liability management, on interbank activities, and on fixed assets as well as gross interest on impaired Corporate Banking handles SMEs (including micro- loans handled by the Credit Recovery Management businesses), large corporations, public-sector enterprises, Department. and trade finance. Loan losses correspond to expected losses for sectors Wealth Management addresses the needs of private dealing with clients. The difference between new and institutional clients. This sector also includes custody provisioning needs and expected loan losses, together activities and the subsidiaries Piguet Galland & Cie SA, with loan impairment charges/reversals, changes in existing Gérifonds SA, and GEP SA. provisions, and recoveries on repaid loans, is booked to the Corporate Center. Trading encompasses financial market transactions (forex, equities, fixed-income instruments, metals, options, Income from customer-driven forex and structured- derivatives, and structured products) conducted by the products trading is allocated to Trading, which reallocates Bank on behalf of customers and for its own account, as part of this income to the business sector to which the well as custody activities. client is attached. Income from securities trading is broken down by portfolio and allocated to the sector to which the The Corporate Center comprises the Board of portfolio manager is attached. Directors, executive management, the Human Resources Department, the Strategy & Organization Department, “Other income” is allocated based on the nature of the the Corporate Communications Department, the item. Service Quality Unit, the Finance & Risks Division (Risk Management, Financial Accounting, Controlling, ALM & Operating expenses and depreciation and amortization are Financial Management, Compliance, Legal, and Tax and allocated in two stages. The first of these involves charging Wealth Planning), the Credit Management Division (Credit direct expenses to the sector that uses the resources Analysis, Credit Analysis Support, and Credit Recovery (personnel, premises, IT, etc.). In the second stage, indirect Management), and the Business Support Division (IT expenses are allocated on the basis of services provided Solutions, IT Infrastructure, Facility Management & General among sectors. Services, Back Office, and Security). Taxes are calculated per sector according to the tax rates As a general rule, revenue is allocated to the sector to which in effect. the client or his/her advisor is attached. Balance-sheet and off-balance-sheet volumes reflect client- For sectors dealing with clients, “Net interest income related business. In general, following the same rule used before loan impairment charges/reversals” corresponds to for income, business volumes are allocated to the sector to the gross commercial margin, i.e., the difference between which the client or his/her advisor is attached. the customer rate and the money-market rate, taking into account the nature and duration of the transaction (Funds The definition of assets under management can be found in
154 2019 Annual Report 155 Financial Statements – Consolidated Financial Statements
note 11.4 to the consolidated financial statements.
Shareholders’ equity is allocated to the various types of business within each sector at 13.0%. Surplus equity is booked to the Corporate Center.
154 2019 Annual Report 155 Financial Statements – Consolidated Financial Statements
Retail Banking Corporate Banking Wealth Management Trading Corporate Center BCV Group 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 13.2.2 Customer business volumes by sector (in CHF millions)
Loans and advances to customers 88 85 4 761 4 640 705 672 – 0 0 199 280 5 752 5 677 Mortgage loans 8 296 8 003 10 116 9 594 7 781 7 661 0 0 822 821 27 016 26 079 Total customer loans 8 384 8 088 14 876 14 234 8 487 8 333 – 0 0 1 021 1 101 32 768 31 756
Customer deposits 9 086 8 523 10 142 9 595 13 432 12 820 5 27 382 410 33 048 31 375
Off-balance-sheet commitments 81 67 2 686 3 085 71 69 10 11 466 480 3 313 3 712
Assets under management (including double-counted) 10 821 9 937 13 893 12 900 72 741 64 411 0 0 385 372 97 840 87 620
13.2.3 Results by business sector (in CHF millions)
Net interest income before loan impairment charges/reversals 112.0 110.3 231.7 228.4 121.8 120.4 3.6 3.4 27.7 33.5 496.9 496.1 Loan impairment charges/reversals1 – 3.5 – 3.6 – 33.0 – 29.6 – 2.7 – 3.4 – 0.0 0.0 49.0 30.5 9.8 – 5.9 Net interest income after loan impairment charges/reversals 108.5 106.8 198.7 198.9 119.1 117.0 3.6 3.4 76.7 64.1 506.7 490.1 Net fee and commission income 46.9 46.4 51.9 53.8 220.9 214.4 0.5 0.4 2.8 2.1 322.9 317.2 Net trading income 17.1 17.3 9.8 9.7 20.7 20.8 46.0 41.5 34.6 38.8 128.1 128.1 Other income 1.2 1.3 4.3 4.5 1.9 2.0 0.0 0.0 36.8 33.3 44.3 41.1 Revenues 173.7 171.8 264.7 266.9 362.6 354.3 50.1 45.3 150.8 138.3 1 002.0 976.5 Personnel costs – 45.1 – 44.3 – 31.8 – 31.3 – 102.8 – 100.9 – 13.1 – 13.6 – 146.5 – 142.6 – 339.3 – 332.7 Operating expenses – 45.1 – 44.2 – 10.8 – 11.6 – 38.4 – 38.2 – 7.9 – 9.6 – 63.1 – 63.9 – 165.2 – 167.5 Depreciation, amortization and write-offs – 15.0 – 15.1 – 1.8 – 1.7 – 14.6 – 13.8 – 1.7 – 1.3 – 38.3 – 36.9 – 71.3 – 68.8 Interdivisional billing – 30.5 – 38.2 – 59.3 – 59.0 – 66.4 – 68.6 – 4.9 – 3.7 161.0 169.3 0.0 0.0 Other provisions and loses – 1.0 – 1.0 – 6.9 – 6.9 – 1.6 – 2.9 – 0.7 – 1.1 3.1 7.3 – 7.2 – 4.7 Operating profit 37.1 29.0 154.1 156.4 138.7 129.9 21.9 16.1 67.0 71.5 418.9 402.9 Extraordinary income and expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 34.9 0.5 34.9 Taxes 2 and minority interests – 4.9 – 6.1 – 20.5 – 32.8 – 19.7 – 27.6 – 2.9 – 3.4 – 8.4 – 18.3 – 56.6 – 88.2 Net profit 32.2 22.9 133.6 123.5 119.0 102.4 19.0 12.7 59.0 88.1 362.9 349.7
13.2.4 Indicators
Average shareholders’ equity (in CHF millions)3 277 263 1 325 1 337 357 351 65 85 1 482 1 416 3 506 3 451 ROE (%) 11.6 8.7 10.1 9.2 33.3 29.2 29.4 15.0 0 0 10.4 10.1 Cost/income ratio (%)4 76.5 80.8 34.8 34.9 59.9 61.0 54.9 62.1 0 0 57.7 57.6 Average headcount 362 359 188 188 499 498 55 56 807 801 1 910 1 902
2018 figures were adjusted to facilitate like-for-like comparison.
1) Expected loan losses are allocated to the business sectors. The difference between new provisioning needs and expected loan losses is booked to the Corporate Center 2) Taxes are calculated per business sector according to the tax rates in effect 3) Equity is allocated to the business sectors at 13.0%; surplus equity is booked to the Corporate Center 4) Costs used for calculating the cost/income ratio per sector comprise: personnel costs; operating expenses; depreciation, amortization and write-offs; and interdivisional billing. Income comprises income before loan impairment charges
156 2019 Annual Report 157 Financial Statements – Consolidated Financial Statements
Retail Banking Corporate Banking Wealth Management Trading Corporate Center BCV Group 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 13.2.2 Customer business volumes by sector (in CHF millions)
Loans and advances to customers 88 85 4 761 4 640 705 672 – 0 0 199 280 5 752 5 677 Mortgage loans 8 296 8 003 10 116 9 594 7 781 7 661 0 0 822 821 27 016 26 079 Total customer loans 8 384 8 088 14 876 14 234 8 487 8 333 – 0 0 1 021 1 101 32 768 31 756
Customer deposits 9 086 8 523 10 142 9 595 13 432 12 820 5 27 382 410 33 048 31 375
Off-balance-sheet commitments 81 67 2 686 3 085 71 69 10 11 466 480 3 313 3 712
Assets under management (including double-counted) 10 821 9 937 13 893 12 900 72 741 64 411 0 0 385 372 97 840 87 620
13.2.3 Results by business sector (in CHF millions)
Net interest income before loan impairment charges/reversals 112.0 110.3 231.7 228.4 121.8 120.4 3.6 3.4 27.7 33.5 496.9 496.1 Loan impairment charges/reversals1 – 3.5 – 3.6 – 33.0 – 29.6 – 2.7 – 3.4 – 0.0 0.0 49.0 30.5 9.8 – 5.9 Net interest income after loan impairment charges/reversals 108.5 106.8 198.7 198.9 119.1 117.0 3.6 3.4 76.7 64.1 506.7 490.1 Net fee and commission income 46.9 46.4 51.9 53.8 220.9 214.4 0.5 0.4 2.8 2.1 322.9 317.2 Net trading income 17.1 17.3 9.8 9.7 20.7 20.8 46.0 41.5 34.6 38.8 128.1 128.1 Other income 1.2 1.3 4.3 4.5 1.9 2.0 0.0 0.0 36.8 33.3 44.3 41.1 Revenues 173.7 171.8 264.7 266.9 362.6 354.3 50.1 45.3 150.8 138.3 1 002.0 976.5 Personnel costs – 45.1 – 44.3 – 31.8 – 31.3 – 102.8 – 100.9 – 13.1 – 13.6 – 146.5 – 142.6 – 339.3 – 332.7 Operating expenses – 45.1 – 44.2 – 10.8 – 11.6 – 38.4 – 38.2 – 7.9 – 9.6 – 63.1 – 63.9 – 165.2 – 167.5 Depreciation, amortization and write-offs – 15.0 – 15.1 – 1.8 – 1.7 – 14.6 – 13.8 – 1.7 – 1.3 – 38.3 – 36.9 – 71.3 – 68.8 Interdivisional billing – 30.5 – 38.2 – 59.3 – 59.0 – 66.4 – 68.6 – 4.9 – 3.7 161.0 169.3 0.0 0.0 Other provisions and loses – 1.0 – 1.0 – 6.9 – 6.9 – 1.6 – 2.9 – 0.7 – 1.1 3.1 7.3 – 7.2 – 4.7 Operating profit 37.1 29.0 154.1 156.4 138.7 129.9 21.9 16.1 67.0 71.5 418.9 402.9 Extraordinary income and expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 34.9 0.5 34.9 Taxes 2 and minority interests – 4.9 – 6.1 – 20.5 – 32.8 – 19.7 – 27.6 – 2.9 – 3.4 – 8.4 – 18.3 – 56.6 – 88.2 Net profit 32.2 22.9 133.6 123.5 119.0 102.4 19.0 12.7 59.0 88.1 362.9 349.7
13.2.4 Indicators
Average shareholders’ equity (in CHF millions)3 277 263 1 325 1 337 357 351 65 85 1 482 1 416 3 506 3 451 ROE (%) 11.6 8.7 10.1 9.2 33.3 29.2 29.4 15.0 0 0 10.4 10.1 Cost/income ratio (%)4 76.5 80.8 34.8 34.9 59.9 61.0 54.9 62.1 0 0 57.7 57.6 Average headcount 362 359 188 188 499 498 55 56 807 801 1 910 1 902
2018 figures were adjusted to facilitate like-for-like comparison.
1) Expected loan losses are allocated to the business sectors. The difference between new provisioning needs and expected loan losses is booked to the Corporate Center 2) Taxes are calculated per business sector according to the tax rates in effect 3) Equity is allocated to the business sectors at 13.0%; surplus equity is booked to the Corporate Center 4) Costs used for calculating the cost/income ratio per sector comprise: personnel costs; operating expenses; depreciation, amortization and write-offs; and interdivisional billing. Income comprises income before loan impairment charges
156 2019 Annual Report 157 Financial Statements – Consolidated Financial Statements
13.3 Consolidated income statement – 5-year overview (in CHF millions)
2015 2016 2017 2018 2019 Interest and discount income 628.7 599.0 576.4 573.1 570.3 Interest and dividend income from financial investments 47.4 40.3 34.7 31.0 27.9 Interest expense – 186.9 – 156.7 – 113.3 – 108.0 – 101.4 Net interest income before loan impairment charges/reversals 489.2 482.5 497.8 496.1 496.9 Loan impairment charges/reversals 0.9 – 4.7 – 20.2 – 5.9 9.8 Net interest income after loan impairment charges/reversals (NII) 490.1 477.8 477.6 490.1 506.7
Fees and commissions on securities and investment transactions 263.3 241.5 250.3 250.2 259.4 Fees and commissions on lending operations 42.7 42.2 44.6 46.1 44.5 Fees and commissions on other services 80.9 75.2 71.8 72.6 73.6 Fee and commission expense – 54.6 – 51.0 – 50.3 – 51.7 – 54.6 Net fee and commission income 332.3 307.9 316.4 317.2 322.9
Net trading income and fair-value adjustments 150.5 139.2 133.9 128.1 128.1
Gains/losses on disposals of financial investments 11.4 6.4 2.5 2.1 0.5 Income from equity investments 15.3 5.5 6.2 11.9 13.7 of which other non-consolidated holdings 15.3 5.5 6.2 11.9 13.7 Real-estate income 10.7 11.0 10.9 7.5 7.5 Miscellaneous ordinary income 22.1 21.6 20.0 20.0 22.9 Miscellaneous ordinary expenses – 6.8 – 2.3 – 0.9 – 0.3 – 0.3 Other ordinary income 52.7 42.1 38.7 41.1 44.3
Total income from ordinary banking operations 1 025.6 967.1 966.6 976.5 1 002.0
Personnel costs – 337.2 – 338.0 – 337.0 – 332.7 – 339.3 Other operating expenses – 177.0 – 170.7 – 171.4 – 167.5 – 165.2 Operating expenses – 514.2 – 508.7 – 508.4 – 500.2 – 504.5
Depreciation and amortization of fixed assets and impair- ment on equity investments – 75.6 – 72.4 – 70.4 – 68.8 – 71.3 Other provisions and losses – 37.1 – 2.7 – 1.2 – 4.7 – 7.2 Operating profit 398.7 383.4 386.5 402.9 418.9
Extraordinary income 28.6 6.7 16.8 34.9 0.7 Extraordinary expenses 0.0 – 0.0 – 0.0 – 0.0 – 0.2 Change in reserves for general banking risks 0.0 3.0 0.0 0.0 0.0 Taxes – 91.0 – 83.5 – 83.1 – 88.1 – 56.6 Net profit 336.3 309.6 320.3 349.7 362.9 Minority interests 0.0 – 0.0 – 0.0 – 0.0 – 0.0 Net profit attributable to BCV Group shareholders 336.3 309.6 320.2 349.7 362.9
158 2019 Annual Report 159 Financial Statements – Consolidated Financial Statements
13.4 Consolidated balance sheet – 5-year overview (in CHF millions)
31 / 12 / 15 31 / 12 / 16 31 / 12 / 17 31 / 12 / 18 31 / 12 / 19 Cash and cash equivalents 6 861 7 496 8 044 8 235 8 384 Due from banks 1 810 1 373 1 013 1 921 1 186 Reverse repurchase agreements 280 306 499 314 239 Loans and advances to customers 4 935 4 812 4 826 5 677 5 752 Mortgage loans 24 522 25 037 25 407 26 079 27 016 Trading portfolio assets 155 153 186 334 277 Positive mark-to-market values of derivative financial instruments 343 281 282 268 273 Other financial assets at fair value 581 630 653 621 784 Financial investments 3 140 3 234 3 753 3 767 3 811 Accrued income and prepaid expenses 106 107 91 80 85 Non-consolidated holdings 48 70 70 70 69 Tangible fixed assets 558 517 519 445 433 Intangible assets 23 16 12 9 5 Other assets 56 54 57 42 36 Assets 43 418 44 085 45 415 47 863 48 352
Due to banks 1 224 1 070 1 398 2 655 1 703 Repurchase agreements 1 738 1 791 1 350 1 809 1 502 Customer deposits 28 877 29 245 30 512 31 375 33 048 Trading portfolio liabilities 0 0 0 0 2 Negative mark-to-market values of derivative financial instruments 331 244 205 236 213 Other financial liabilities at fair value 666 771 812 766 918 Medium-term notes 40 21 15 7 3 Bonds and mortgage-backed bonds 6 873 7 267 7 392 7 244 7 094 Accrued expenses and deferred income 219 184 172 156 154 Other liabilities 35 56 87 77 114 Provisions 18 16 15 15 16 Liabilities 40 021 40 666 41 958 44 341 44 766 Reserves for general banking risks 704 701 701 701 701 Share capital 86 86 86 86 86 Capital reserve 292 207 121 35 35 Retained earnings 1 999 2 137 2 249 2 371 2 419 Currency translation reserve – 2 – 2 – 1 – 1 – 2 Own shares – 18 – 19 – 19 – 20 – 18 Minority interests in equity 0 0 0 0 0 Net profit 336 310 320 350 363 Shareholders' equity 3 397 3 420 3 457 3 522 3 586 Total liabilities and shareholders’ equity 43 418 44 085 45 415 47 863 48 352
158 2019 Annual Report 159 Financial Statements – Consolidated Financial Statements
Statutory Auditor’s Report To the General Meeting of Banque Cantonale Vaudoise, Lausanne
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Banque Cantonale Vaudoise and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2019, and the consolidated income statement, the consolidated cash flow statement and the consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion the consolidated financial statements (pages 111 to 152) give a true and fair view of the consolidated financial position of the Group as at 31 December 2019, and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with accounting rules for banks, securities dealers, financial groups and conglomerates (ARB) and comply with Swiss law.
Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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160 2019 Annual Report 161 Financial Statements – Consolidated Financial Statements
Methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans
Key Audit Matter Our response
Mortgages and loans are one of the Group’s main Our procedures consisted in particular in assessing and activities and represent approximately two thirds of its testing the key controls related to the granting, recording consolidated balance sheet as at 31 December 2019. and monitoring of mortgages and loans as well as the The valuation of a counterparty’s default risk relies methodology used for the identification of default risk largely on the use of rating methods developed by the and the valuation of the loan impairment charges. bank. The valuation of the related loan impairment charges relies on an analysis method that takes into For a sample of non-impaired exposures, we assessed account various elements such as market factors, the the debtors’ capacity to fulfil their obligations. We client’s estimated willingness to repay and financial compared our findings with the assessment of the capacity or the estimation of the collateral’s value. default risk performed by the bank using its counterparty rating process. The identification of risks and the valuation of the related loan impairment charges thus rely on models and Regarding receivables that are considered as impaired analyses that imply an element of judgement by the or as presenting latent risks, our procedures consisted, Board of Directors and Management. Exposures that among others, of assessing the evolution of the relation create greater uncertainty are typically those that result between the loan impairment and the concerned from unsecured loans or those that are subject to a receivables as a whole. For a sample of individual collateral’s loss of value. receivables that are considered as impaired or as presenting latent risks, we assessed the debtors’ financial standing as well as the valuation of collaterals and we compared our findings with the assumptions and factors taken into account by the bank when calculating the required loan impairment charges.
For further information on methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans, refer to the following notes to the consolidated financial statements of Banque Cantonale Vaudoise as at 31 December 2019:
— Note 7.2 “Credit risk” (p. 123 to 125 of the Annual Report) — Note 10.2 “Risk mitigants for loans and off-balance-sheet transactions, impaired loans” (p. 129 of the Annual Report)
Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with accounting rules for banks, securities dealers, financial groups and conglomerates (ARB) and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
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160 2019 Annual Report 161 Financial Statements – Consolidated Financial Statements
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. — Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. — Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. — Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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162 2019 Annual Report 163 Financial Statements – Consolidated Financial Statements
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG SA
Olivier Gauderon Philippe Ruedin Licensed Audit Expert Licensed Audit Expert Auditor in Charge
Geneva, 6 March 2020
4 KPMG SA, Esplanade de Pont-Rouge 6, CH-1211 Geneva 26
KPMG SA is a subsidiary of KPMG Holding SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.
162 2019 Annual Report 163 Financial Statements Parent Company Financial Statements
1. Balance sheet (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change Notes absolute as % Cash and cash equivalents 8 125 8 049 75 1 Due from banks 1 249 1 954 – 706 – 36 Reverse repurchase agreements 5.1 239 314 – 75 – 24 Loans and advances to customers 5.2 5 571 5 485 87 2 Mortgage loans 5.2 26 506 25 555 950 4 Trading portfolio assets 5.3 277 334 – 57 – 17 Positive mark-to-market values of derivative financial instruments 5.4 275 274 1 0 Other financial assets at fair value 5.3 784 621 163 26 Financial investments 5.5 3 790 3 746 45 1 Accrued income and prepaid expenses 81 75 6 8 Holdings 177 177 0 0 Tangible fixed assets 402 412 – 10 – 2 Other assets 5.6 30 35 – 5 – 14 Assets 5.18 47 505 47 031 474 1 Total subordinated assets 0 0 0 0 off which subject to mandatory conversion and/or conditionnal write-off 0 0 0 0
Due to banks 1 734 2 711 – 977 – 36 Repurchase agreements 5.1 1 502 1 809 – 307 – 17 Customer deposits 5.19 32 207 30 528 1 679 5 Trading portfolio liabilities 5.3 2 0 1 n/a Negative mark-to-market values of derivative financial instruments 5.4 209 234 – 25 – 11 Other financial liabilities at fair value 5.3/5.10 918 766 152 20 Medium-term notes 3 7 – 4 – 54 Bonds and mortgage-backed bonds 7 094 7 244 – 150 – 2 Accrued expenses and deferred income 140 144 – 5 – 3 Other liabilities 5.6 116 80 36 44 Provisions 5.11 9 8 1 9 Liabilities 43 933 43 532 401 1 Reserves for general banking risks 5.11 701 701 0 0 Share capital 5.12/5.15/5.16 86 86 0 0 Regulatory capital reserve 7 7 0 0 of which tax-exempt paid-in capital 7 7 0 0 Regulatory retained earnings 87 86 0 0 Optional retained earnings 2 337 2 276 61 3 Own shares – 18 – 20 2 – 9 Profit for the year 372 362 10 3 Shareholders' equity 3 572 3 499 73 2 Total liabilities and shareholders' equity 47 505 47 031 474 1 Total subordinated liabilities 0 0 0 0 of which subject to mandatory conversion and/to conditional write-off 0 0 0 0
164 2019 Annual Report 165 Financial Statements – Parent Company Financial Statements
Off-balance-sheet transactions 31 / 12 / 19 31 / 12 / 18 Change Change (in CHF millions) Notes absolute as % Contingent liabilities 5.2 1 793 1 868 – 75 – 4 Irrevocable commitments 5.2 1 292 1 617 – 325 – 20 Commitments relating to calls on shares and other equity securities 5.2 177 177 0 0 Confirmed credits 5.2 46 49 – 2 – 5
164 2019 Annual Report 165 Financial Statements – Parent Company Financial Statements
2. Income statement (in CHF millions)
2019 2018 Change Change Notes absolute as % Interest and discount income 561.0 563.9 – 2.9 – 1 Interest and dividend income from financial investments 27.7 30.9 – 3.2 – 10 Interest expense – 99.0 – 105.7 – 6.7 – 6 Net interest income before loan impairment charges/reversals 7.1 489.7 489.1 0.6 0 Loan impairment charges/reversals 9.1 – 6.0 – 15.1 – 251 Net interest income after loan impairment charges/reversal (NII) 498.8 483.1 15.8 3
Fees and commissions on securities and investment transactions 170.1 164.0 6.1 4 Fees and commissions on lending operations 44.4 46.1 – 1.7 – 4 Fees and commissions on other services 70.0 69.3 0.6 1 Fee and commission expense – 18.9 – 18.8 0.0 0 Net fee and commission income 265.7 260.6 5.0 2
Net trading income and fair-value adjustments 7.2 116.4 115.8 0.7 1
Gains/losses on disposals of financial investments 0.4 1.6 – 1.2 – 77 Income from equity investments 31.4 31.0 0.4 1 Real-estate income 7.0 7.0 0.0 1 Miscellaneous ordinary income 23.4 20.4 3.0 15 Miscellaneous ordinary expenses – 0.4 – 0.2 0.2 114 Other ordinary income 61.8 59.8 2.0 3
Total income from ordinary banking operations 942.8 919.3 23.5 3
Personnel costs 7.3 – 299.0 – 292.3 6.7 2 Other operating expenses 7.4 – 148.4 – 150.6 – 2.2 – 1 Operating expenses – 447.4 – 442.9 4.5 1 Depreciation and amortization of fixed assets and impairment on equity investments – 64.0 – 60.9 3.1 5 Other provisions and losses 7.5 – 5.8 – 2.0 3.8 185 Operating profit 425.6 413.4 12.1 3 Extraordinary income 7.6 0.7 34.9 – 34.2 – 98 Extraordinary expenses 7.7 – 0.2 – 0.0 0.2 641 Taxes 7.8 – 53.8 – 86.0 – 32.2 – 37 Profit for the year 372.3 362.3 10.0 3
Appropriations 8 Profit for the year 372.3 362.3 Profit shown on the balance sheet 372.3 362.3 Appropriation of profit - Allocation to optional retained earnings 62.4 61.1 - Allocation to regulatory retained earnings 0.0 0.0 - Distribution from distributable profit 309.8 301.2
166 2019 Annual Report 167 Financial Statements – Parent Company Financial Statements
3. Statement of changes in equity (in CHF millions)
Reserves Share Capital Regulatory for general Optional Own shares Profit/loss Total capital reserve retained banking retained for the year equity earnings risks earnings Status at 1 January 2017 86 179 86 701 2 027 – 19 315 3 375 Allocation to other reserves 117 – 117 0 2016 dividend – 198 – 198 Distribution out of paid-in reserves – 86 – 86 Purchases of own shares – 28 – 28 Disposals of own shares 29 29 Gain on disposals of own shares and dividends 0 0 0 Profit/loss for the year 329 329 Status at 31 December 2017 86 93 86 701 2 145 – 19 329 3 421 Allocation to other reserves 131 – 131 0 2017 dividend – 198 – 198 Distribution out of paid-in reserves – 86 – 86 Purchases of own shares – 26 – 26 Disposals of own shares 26 26 Gain on disposals of own shares and dividends 0 0 0 Profit/loss for the year 362 362 Status at 31 December 2018 86 7 86 701 2 276 – 20 362 3 499 Allocation to other reserves 61 – 61 0 2018 dividend – 301 – 301 Purchases of own shares – 22 – 22 Disposals of own shares 24 24 Gain on disposals of own shares and dividends 0 0 Profit/loss for the year 372 372 Status at 31 December 2019 86 7 87 701 2 337 – 18 372 3 572
166 2019 Annual Report 167 Financial Statements – Parent Company Financial Statements
4. Parent company name and accounting principles 4.4 Changes to accounting principles
4.1 Company name, legal status, and head office No changes were made to the accounting principles in 2019.
Banque Cantonale Vaudoise (BCV) was founded on 19 4.5 Risk-assessment and risk-management principles December 1845 by the Vaud Cantonal Parliament as a société anonyme de droit public (i.e., a corporation Risk-assessment and risk-management principles for the organized under public law). Its legal status is defined in parent company are the same as those for the Group; the Cantonal Act Governing the Organization of Banque they are detailed in note 7 to the consolidated financial Cantonale Vaudoise (LBCV) of 20 June 1995, and its head statements. office is in Lausanne. 4.6 Use of hedge accounting 4.2 Accounting principles for the parent company financial statements Information on the use of hedge accounting by the parent company is the same as for the Group; it is provided in note BCV’s financial statements have been prepared in 8 to the consolidated financial statements. accordance with the Swiss Federal Act of 8 November 1934 on Banks and Savings Institutions, the corresponding 4.7 Events taking place after the closing date Ordinance of 30 April 2014, and the Swiss Accounting Rules for Banks, Securities Dealers, Financial Groups and To the parent company’s knowledge, there was no Conglomerates of 27 March 2014 (FINMA Circular 2015/1). event liable to have a material influence on the financial The financial statements give a true and fair view of the statements as at 5 March 2020, when the writing of this Bank’s financial position that would enable a third party to annual report was completed. form an accurate opinion of the Bank’s financial situation.
4.3 Accounting and valuation principles
The valuation principles used to draw up the parent company financial statements are the same as those used for the consolidated financial statements, with the exception of the following items:
4.3.1 Holdings
This line item comprises shares and other equity securities held as long-term investments. They are carried at cost less any impairment.
4.3.2 Own shares
Dividend payments on own shares and gains and losses on own-share disposals are allocated directly to regulatory retained earnings, while for the consolidated financial statements they are allocated to the capital reserve.
168 2019 Annual Report 169 Financial Statements – Parent Company Financial Statements
5. Notes to the balance sheet
5.1 Repurchase and reverse repurchase agreements (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Book value of claims arising from cash collateral pledged in connection with securities borrowing or reverse repurchase agreements1 239 314 Book value of liabilities arising from cash collateral received in connection with securities lending or repurchase agreements1 1 502 1 809 Book value of securities held for own account, lent or transferred as collateral in connection with securities borrowing or repurchase agreements 1 644 1 792 of which those that can be sold or repledged without restriction 1 644 1 792 Fair value of securities received as collateral in connection with securities lending and those received in connection with securities borrowing and under reverse repurchase agreements, which can be sold or repledged without restriction 264 346 of which securities repledged as collateral 0 0 of which sold securities 0 0
1) Before netting agreements
5.2 Risk mitigants for loans and off-balance-sheet transactions Impaired loans (in CHF millions)
Type of risk mitigant Mortgage Other Unsecured Total Loans and advances to customers 563 1 758 3 325 5 646 Mortgages 26 514 26 514 Residential real estate 21 313 21 313 Office and business premises 1 410 1 410 Commercial and industrial property 831 831 Other 2 960 2 960 Loans (before impairment charges/reversals) 31 / 12 / 19 27 077 1 758 3 325 32 160 31 / 12 / 18 26 116 1 680 3 335 31 130 Loans (after impairment charges/reversals) 31 / 12 / 19 27 069 1 758 3 250 32 077 31 / 12 / 18 26 108 1 680 3 253 31 040
Contingent liabilities 12 372 1 409 1 793 Irrevocable commitments 369 0 922 1 292 Commitments relating to calls on shares and other equity securities 177 177 Confirmed credits 46 46 Off-balance-sheet transactions 31 / 12 / 19 381 373 2 555 3 309 31 / 12 / 18 480 325 2 906 3 710
Gross Realization value Net Individual receivables of risk mitigants receivables impairment charge/reversal Impaired loans and off-balance-sheet commitments 31 / 12 / 19 183 – 92 91 83 31 / 12 / 18 218 – 123 95 87 Change (absolute) – 34 – 31 – 4 – 4 Change (as %) – 16 – 25 – 4 – 4
168 2019 Annual Report 169 Financial Statements – Parent Company Financial Statements
5.3 Trading portfolio assets and liabilities Other financial assets and liabilities at fair value (in CHF millions)
Assets 31 / 12 / 19 31 / 12 / 18 Debt securities 164 144 of which listed on a recognized stock exchange 164 144 Equity securities 2 1 Commodities and precious metals 111 189 Trading portfolio assets 277 334 Debt securities 58 11 Structured products 1 0 Other 725 610 Other financial assets at fair value 784 621 Total 1 061 955 of which determined using a valuation model 0 0 of which securities eligible for repurchase agreements in accordance with liquidity regulations 70 85
Liabilities 31 / 12 / 19 31 / 12 / 18 Debt securities 1 0 of which listed on a recognized stock exchange 1 0 Equity securities 1 0 Other trading portfolio liabilities 0 0 Trading portfolio liabilities 2 0 Debt securities 0 0 Structured products 918 766 Other financial liabilities at fair value 918 766 Total 919 766 of which determined using a valuation model 83 62
170 2019 Annual Report 171 Financial Statements – Parent Company Financial Statements
5.4 Derivative financial instruments (in CHF millions)
Trading instruments Hedging instruments Positive Negative Value of Positive Negative Value of market-to-market market-to-market underlying asset market-to-market market-to-market underlying asset value value value value Swaps 20 26 1 017 183 124 6 354 Futures 145 Options (OTC) 1 0 82 Interest-rate instruments 21 26 1 244 183 124 6 354
Forward contracts and swaps 235 232 31 308 Options (OTC) 29 23 3 613 Foreign currencies and precious metals 263 255 34 921 0 0 0
Futures 16 Options (OTC) 28 26 210 Options (exchange traded) 1 9 Equity securities / indices 29 26 236 0 0 0
Futures 0 Other 0 0 0 0 0 0
Total 31 / 12 / 19 313 307 36 401 183 124 6 354 of which determined using a valuation model 57 49 – – – – 31 / 12 / 18 330 336 35 381 165 119 6 012 of which determined using a valuation model 114 102 – – – –
Positive Negative Value of market-to-market market-to-market underlying asset value value Breakdown Trading instruments 313 307 36 401 Hedging instruments 183 124 6 354 Total before netting agreements 31 / 12 / 19 496 431 42 755 31 / 12 / 18 495 455 41 393
Total after netting agreements 31 / 12 / 19 275 209 42 755 31 / 12 / 18 274 234 41 393 Change absolute 1 – 25 1 363 as % 0 – 11 3
Breakdown by counterparty Central clearing houses Banks and securities dealers Other clients Positive market-to-market value (after netting agreements) 89 136 49
170 2019 Annual Report 171 Financial Statements – Parent Company Financial Statements
5.5 Financial investments (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Book value Fair value Book value Fair value Debt securities 3 710 3 822 3 663 3 765 of which securities intended to be held until maturity 3 710 3 822 3 663 3 765 of which securities available for sale 0 0 0 0 Equity securities 25 76 27 75 of which significant holdings (minimum of 10% of capital or voting rights) 4 4 6 6 Available-for-sale real estate 55 60 56 60 Financial investments 3 790 3 958 3 746 3 901 including securities eligible for repurchase agreements in accordance with liquidity regulations 3 710 – 3 663 –
Counterparty breakdown by rating AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Not rated Total Book value of debt securities 3 508 202 3 710
The rating categories are based on Standard & Poor’s The Bank’s unrated positions (that is, where neither the ins- ratings; they are used for the specific instruments to which trument nor the issuer has a rating) are in investment-grade the Bank has subscribed. If an instrument is not rated by debt securities issued by Swiss public-sector entities or by Standard & Poor’s, then a rating from another agency is Switzerland’s housing-construction bond issuer (EGW/CCL). used. Where there is no specific rating for a given instru- ment, the issuer’s long-term rating is used, with the same order of rating agencies.
5.6 Other assets and liabilities (in CHF millions) 31 / 12 / 19 31 / 12 / 18 Other Other Other Other assets liabilities assets liabilities Offset accounts 0 58 0 46 Indirect taxes 19 8 23 9 Coupons/coupons and securities due 0 0 3 1 Settlement accounts 4 41 6 10 Miscellaneous assets and liabilities 7 7 3 15 Other assets and liabilities 30 116 35 80
5.7 Assets pledged or assigned as collateral for own liabilities, and assets with reservation of title (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Amount or Real Amount or Real book value liability book value liability of pledge of pledge Assets pledged or assigned to Swiss National Bank 188 189 0 Mortgages pledged or assigned to Central mortgage-bond Institution of Swiss Cantonal Banks 8 148 5 335 7 498 5 509 Other 281 281 278 278 Total assets pledged or assigned 8 616 5 616 7 965 5 787
Assets with reservation of title 0 0 0 0
172 2019 Annual Report 173 Financial Statements – Parent Company Financial Statements
5.8 Commitments relating to own occupational pension funds BCV shares held by own occupational pension funds (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Customer deposits 217 187
BCV’s own occupational pension funds held no BCV shares at 31 December 2019.
5.9 Economic situation of own occupational pension funds (in CHF millions)
There were no employer contribution reserves at end-2019 or end-2018.
Economic benefit/liability Surplus / Economic benefit/liability Contributions Pension expenses included in and pension expenses deficit adjusted for “Personnel costs” the period 31 / 12 / 19 31 / 12 / 19 31 / 12 / 18 Change 2019 2019 2018 Employer-financed pension funds: “Fonds de prévoyance en faveur du personnel de la BCV”1 51.5 0 0 0 0.0 0.0 0.0 Pension funds with no surplus or defi- cit: “Caisse de pensions de la BCV” 0 0 0 31.8 31.8 31.2 Pension funds with surpluses: “Fondation de prévoyance complé- mentaire en faveur de l'encadrement supérieur de la BCV” 0.8 0 0 0 1.2 1.2 1.1 Total 52.4 0 0 0 33.0 33.0 32.4
1) Since the intention is not to apply the surpluses to reduce or refund the employer’s contributions, or for the employer to use them for any economic purpose other than regulatory benefits, there is no identifiable economic benefit to be recognized on the balance sheet
The surplus or deficit of a pension fund is based on its Senior executives insured with the CP BCV are also unaudited interim accounts at 30 September 2019. members of the “Fondation de prévoyance complémentaire de la Banque Cantonale Vaudoise,” the purpose of which is Pension funds to insure its members against the economic consequences BCV Group employees are members of the “Caisse de of retirement, disability, and death by guaranteeing pensions de la Banque Cantonale Vaudoise (CP BCV).” Its benefits in accordance with the terms of the pension-fund purpose is to insure its members against the economic regulations. consequences of retirement, disability, and death by guaranteeing benefits in accordance with the terms The “Fonds de prévoyance en faveur du personnel de of the pension-fund regulations. It is a provider of the la BCV” is an employer-operated fund that assists BCV compulsory insurance introduced under the Federal Act employees in dealing with the economic consequences of on Occupational Retirement, Survivors’ and Disability old age, disability, illness, and early retirement. Pension Plans (LPP), and provides coverage in excess of the minimum LPP requirements.
172 2019 Annual Report 173 Financial Statements – Parent Company Financial Statements
5.10 Issued structured products (in CHF millions)
Carrying value Single treatment Separate treatment Underlying risk of embedded derivative Recognized in Recognized in other Value of the Value of the Total trading portfolio financial liabilities host instrument derivative liabilities at fair value Interest-rate instruments – 0 6 – 0 6 Equity securities – 842 740 – 12 1 570 Foreign currencies – 67 4 0 71 Commodities and precious metals – 9 0 0 9 Total 31 / 12 / 19 – 918 750 – 12 1 656 31 / 12 / 18 – 766 753 – 89 1 430
All structured products issued by the Bank have a debenture component.
Single accounting treatment For these structured products, the host instrument and Structured products without an interest-rate component, the embedded derivative(s) are treated separately. The host i.e., participation structured products (representing a instrument is recorded under “Bonds” at nominal value fraction of an equity basket) and yield-enhancement as a debt issued by the Bank. Embedded derivatives are structured products, issued by the Bank are each treated carried as either positive or negative mark-to-market values. as a single position. They are recognized under “Other Subsequent variations are recognized under “Net trading financial liabilities at fair value,” and their fair value is based income and fair-value adjustments.” on a quoted market price or a valuation model. Subsequent revaluations are recognized under “Net trading income and Interest accrued in the interest-rate component is recorded fair-value adjustments.” under “Interest expense” using the accrual method.
Separate accounting treatment Yield-enhancement, participation, and capital-protection structured products issued by the Bank and containing an interest-rate component are each treated as two separate positions.
174 2019 Annual Report 175 Financial Statements – Parent Company Financial Statements
5.11 Provisions Reserves for general banking risks (in CHF millions)
Status at Used as Changes in Currency Recoveries, New Releases Status at year-end allocated scope of con- translation overdue provisions credited to year-end solidation differences interest charged to income income statement statement 2018 2019 Provisions for credit risk 1 4 6 Other provisions 7 – 4 0 1 – 0 3 Total provisions 8 – 4 0 0 0 5 – 0 9 Reserves for general banking risks1 701 701 Provisions for credit risk and country risk 90 – 7 9 11 – 20 83 of which provisions for impaired loans 87 – 7 9 9 – 20 78 of which provisions for latent risks 3 2 5
1) Reserves for general banking risks are taxable
5.12 Share capital (in CHF millions)
2019 2018 Number of Total Number of Total shares par shares par (in units) value (in units) value Share capital Registered share, fully paid-in Par value CHF 10.00 CHF 10.00
Status at 1 January 8 606 190 86 8 606 190 86 No movement 0 0 0 0 Status at 31 December 8 606 190 86 8 606 190 86 of which share capital qualifying for dividends 86 86
Participation certificate capital BCV does not have any participation certificate capital.
Conditional capital BCV does not have any conditional capital.
Authorized capital BCV does not have any authorized capital.
174 2019 Annual Report 175 Financial Statements – Parent Company Financial Statements
5.13 Stock options and shares granted to members of the Board of Directors, Executive Board members, and other employees Employee share-ownership plans
2019 2018 Shares Value Shares Value (in units) (in CHF) (in units) (in CHF) Members of the Board of Directors 0 0 0 0 Executive Board members 3 531 2 362 572 3 476 2 232 436 Other employees 25 333 10 545 428 25 218 10 367 968 Total 28 864 12 908 000 28 694 12 600 404
No stock options have been granted to members of the Board of Directors, Executive Board members, or other employees.
Employee share ownership The market prices used to calculate the number of shares Annual performance-based compensation will be those on 19 March 2020 and 11 May 2020 (see For Executive Board members and department heads, 30% above), so they were not known at the time this report of their annual performance-based compensation must be was published. As a result, the number of shares was taken in BCV shares with a lock-up period of five to ten calculated based on the closing market price on 5 March years. 2020, the date of the Board of Directors’ final decision on this compensation. Other employees receiving annual performance-based compensation of CHF 21,000 or more may opt for full Share-ownership plan payment in cash, or 70% in cash and 30% in BCV shares The Executive Board and other BCV employees were given with a lock-up period of three years. In the latter case, BCV the opportunity to subscribe to the share-ownership plan increases the portion of shares by 30%. in April 2019 on the following terms:
Executive Board members are allocated shares subject to • The number of shares that may be purchased is approval at the Shareholders’ Meeting. The number of determined by the level of responsibility inherent in the shares allocated will be calculated based on the closing employee’s position. market price on 11 May 2020, rounded up to the nearest • The subscription period ran from 14–26 March 2019. whole number. • The subscription price was set at CHF 650 per share, and the market price used was CHF 806 (closing price on Other employees will receive their shares at the end 14 March, the first day of the subscription period). of April 2020. The number of shares allocated will be calculated based on the closing market price on 19 March The amount shown in the table above corresponds to the 2020, rounded up to the nearest whole number. These number of shares subscribed multiplied by CHF 156, which employees have until 1 April 2020 to make their decision. is the difference between the market price of CHF 806 and As their decision was not known at the time this report the subscription price of CHF 650. was published, the amount shown in the above table corresponds to the maximum amount payable in the form of shares.
176 2019 Annual Report 177 Financial Statements – Parent Company Financial Statements
Long-term performance-based compensation Free shares At the beginning of each three-year share-ownership plan, The Bank awards two BCV shares to trainees and high- participants are informed of the number of shares that school graduates who successfully complete their training will be allocated if all objectives are met in full. At the end and are then hired by BCV. of each plan, the Bank informs participants of the extent to which objectives have been met based on the Bank’s The number allocated and their value, based on the market financial results and strategic and qualitative performance. price on the last business day of the month before the The number of shares initially allocated is multiplied by the shares are awarded, are also shown in the table. level of attainment of the objectives in order to determine the number of shares allocated to each participant.
The amounts shown in the table on the previous page correspond to the expense recorded in 2019 for the various plans in progress.
5.14 Receivables and commitments with respect to related parties (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Receivable Commitment Receivable Commitment Significant shareholder 6 3 705 5 2 984 Group companies 86 50 54 72 Affiliated companies 172 391 132 350 Governing bodies 32 7 18 5
Corporations organized under public law in Vaud Canton conducted on market terms. Receivables and commitments and public-private entities in which Vaud Canton has a with respect to Executive Board members were granted on qualified holding are considered affiliated companies. the standard terms for BCV employees. Transactions with Transactions with members of the Board of Directors were related parties were conducted on market terms.
5.15 Significant shareholder
31 / 12 / 19 31 / 12 / 18 Number of shares Total par value Stake Number of shares Total par value Stake (in units) (in units) Voting rights Vaud Canton, direct interest 5 762 252 57.6 66.95% 5 762 252 57.6 66.95%
176 2019 Annual Report 177 Financial Statements – Parent Company Financial Statements
5.16 Own shares and breakdown of share capital
Number of shares (in units) Average Total Own transaction shares price Status at 31 December 2018 8 606 190 28 774 of which shares reserved for long-term performance-based compensation 13 200 Purchases 786 28 546 Sales 743 – 32 648 Status at 31 December 2019 8 606 190 24 672 of which shares reserved for long-term performance-based compensation 12 800
The breakdown of share capital is provided in note 5.12, page 175.
Own shares were traded at market prices. The proceeds of the sale of own shares were recognized under “Capital reserve.”
Non-distributable reserves If the combined total of regulatory retained earnings and the regulatory capital reserve does not exceed half the amount of the Bank’s share capital (i.e., CHF 43m), these line items can be used only to cover losses or for measures designed to sustain the company in the event of an operating loss. There are no regulatory restrictions on how optional reserves can be used.
The Bank must set part of its reserves aside in order to meet regulatory capital requirements.
178 2019 Annual Report 179 Financial Statements – Parent Company Financial Statements
5.17 Compensation and loans granted to members of sation to the Executive Board totaled CHF 1,357,851 for the Board of Directors and Executive Board occupational pensions and CHF 787,106 for other benefits (social security, unemployment insurance, accident insu- 5.17.1 Compensation and loans granted to current rance, income replacement, and family allowances), subject members of the Board of Directors and the to approval of the proposed annual performance-based Executive Board compensation at the Shareholders’ Meeting.
Compensation breakdown (see pages 180-181) Allocation of shares during 2019
Members of the Board of Directors Members of the Board of Directors For 2019, the seven members of the Board of Directors in Since 2019, the members of the Board of Directors receive office at 31 December 2019 were accorded total compensa- their compensation entirely in cash. tion of CHF 1,400,000. Benefit expense resulting from com- pensation to the Board of Directors totaled CHF 145,537 Members of the Executive Board (social security, unemployment insurance, accident insu- For 2019, Executive Board members in office at rance, and family allowances). The Bank does not contri- 31 December 2019 will receive a number of locked-up BCV bute to the occupational pension funds of members of the shares equivalent to 30% of their annual performance-based Board of Directors. compensation. The number of shares will be determined in accordance with the closing share price on 11 May 2020. Compensation comprises fees, remuneration, and expenses. They also subscribed to 600 locked-up shares under the employee share-ownership program. They paid a subscrip- The Vice Chairman receives additional fixed compensation tion price of CHF 650, while the share price at the time of of CHF 20,000. For the members of the Board committees purchase was CHF 806. Every year the Board of Directors – the Audit and Risk Committee and the Compensation, determines the subscription price based on the current Promotions and Appointments Committee – annual com- share price and sets the number of shares to which the Exe- pensation was set as follows: CHF 40,000 for the chairman cutive Board may subscribe. and CHF 20,000 for the other members of the Audit and Risk Committee; and CHF 20,000 for the chairman and Under the 2017–2019 long-term performance-based CHF 10,000 for the other members of the Compensation, salary plan, 1,519 shares were allocated to Executive Board Promotions and Appointments Committee. members (see page 92 in section 5 of the Corporate Gover- nance chapter). The average compensation of Board members, excluding the Chairman, amounted to CHF 128,333. Other fees and compensation Members of the Board of Directors and Executive Board Since 1 November 2002, serving members of the Board of received no fees or other compensation from BCV that are Directors have not been granted any preferential terms for not included in the above compensation. Moreover, all fees banking services. and other amounts received by Executive Board members representing BCV on the boards of directors of other com- Members of the Executive Board panies are remitted to the Bank. In 2019, such payments to For 2019, the eight members of the Executive Board the Bank amounted to CHF 343,621. in office in 2019 were accorded total compensation of CHF 7,946,069. This includes annual performance-based Loans to members of the Board of Directors compensation for an aggregate amount of CHF 3,600,000, and Executive Board subject to approval at the Shareholders’ Meeting on 30 Serving members of the Board of Directors are not April 2020. If approved, this amount will be paid in May accorded preferential terms on loans granted to them. 2020 in two parts: CHF 2,520,000 in cash and the remaining For members of the Executive Board, as well as for all CHF 1,080,000 in the form of shares locked up for between employees, the interest on variable-rate first mortgages was five and ten years. Benefit expense resulting from compen- 1.9% at 31 December 2019. Until 9 December 2019, the inte-
178 2019 Annual Report 179 Financial Statements – Parent Company Financial Statements
rest charged on Libor mortgage loans and on medium- and Share ownership long-term fixed-rate loans was between 0.25% and 0.53% Members of the Board of Directors above market rates, depending on the term of the loan. Under a resolution adopted by the Board of Directors Starting on 10 December 2019, these interest rates were on 7 October 2002, each director is required to own a between 0.15% and 0.36% above market rates. minimum of 100 BCV shares that must be acquired before the end of their first term.
At 31 December 2019, directors and their close relations held a total of 4,616 BCV shares.
Members of the Executive Board At 31 December 2019, Executive Board members and their close relations held 18,545 BCV shares.
Compensation of members of the Board of Directors for the 2019 financial year(in CHF)
Jacques Reto Jack Ingrid Fabienne Peter Jean- Total Average de Watteville Donatsch Clemons Deltenre Freymond Ochsner François compen- Cantone Schwarz sation Excluding Chairman Vice Member Member Member Member Member Chairman Chairman starting 1 January Fees 600 000 115 000 95 000 95 000 95 000 95 000 95 000 1 190 000 98 333 Committee-related compensation 20 000 20 000 10 000 10 000 40 000 20 000 120 000 20 000 Other 30 000 10 000 10 000 10 000 10 000 10 000 10 000 90 000 10 000 Total 630 000 145 000 125 000 115 000 115 000 145 000 125 000 1 400 000 128 333
Other benefits1 46 359 15 843 15 288 13 247 15 026 21 477 18 297 145 537 16 530
1) Social security, unemployment insurance, accident insurance and family allowances. The Banks does not contribute to the occupational pension funds of members of the Board of Directors
Compensation of members of the Board of Directors for the 2018 financial year(in CHF)
Jacques Paul-André Jack Ingrid Reto Fabienne Peter Total Average de Watteville Sanglard Clemons Deltenre Donatsch Freymond Ochsner compen- Cantone sation Member Excluding Chairman Vice Member Member Member starting 26 Member Chairman Chairman April
Fees 600 000 115 000 95 000 95 000 95 000 64 652 95 000 1 159 652 93 275 Committee-related compensation 20 000 16 667 10 000 20 000 6 806 40 000 113 473 18 912 Other 30 000 10 000 10 000 10 000 10 000 6 806 10 000 86 806 9 468 Total 630 000 145 000 121 667 115 000 125 000 78 264 145 000 1 359 931 121 655
Other benefits1 44 610 15 468 15 196 14 107 12 851 3 004 21 041 126 277 13 611
1) Social security, unemployment insurance, accident insurance and family allowances. The Banks does not contribute to the occupational pension funds of members of the Board of Directors
180 2019 Annual Report 181 Financial Statements – Parent Company Financial Statements
Compensation of members of the Executive Board for the 2019 financial year(in CHF) Total Pascal Kiener CEO Shares Shares (in units) (in units) Fixed salary 4 660 080 960 000 Annual performance-based compensation paid in cash1 2 520 000 427 000 Annual performance-based compensation paid in shares1, 2 727 149 102 185 Shares acquired under employee share-ownership program3 600 16 040 0 0 Stock options (BCV has no employee stock-option plan) 0 0 0 0 Other 22 800 6 000 Total 7 946 069 1 495 185 Previous year 7 968 416 1 495 185
2017-2019 long-term performance-based compensation plan Shares allocated at CHF 810 per share4 1 519 1 230 390 217 175 770 Previous year 1 374 1 095 078 229 182 513
Total 9 176 459 1 670 955 Previous year 9 063 494 1 677 698
Occupational pension 1 357 851 214 153 Other benefits5 787 106 140 999 Previous year Occupational pension 1 356 313 212 616 Other benefits5 753 630 136 904
1) Subject to approval at the 2020 Annual Shareholders' Meeting 2) The number of shares will be calculated based on the market price on 11 May 2020, and rounded up to the nearest unit. The value of the shares (in Swiss francs) is discounted according to the duration of the share lock-up period 3) Difference between the subscription price (CHF 650) and the market price on 14 March 2019 (CHF 806) at its discounted value 4) Market price on 5 March 2020 5) Social security, unemployment insurance, accident insurance, income replacement and family allowances
180 2019 Annual Report 181 Financial Statements – Parent Company Financial Statements
Loans to members of governing bodies (in CHF)
31 / 12 / 19 Position Nominal Secured Unsecured Drawn down Board of Directors Jacques de Watteville Chairman 0 Reto Donatsch Vice Chairman 0 Jack Clemons Member 365 000 365 000 365 000 Ingrid Deltenre Member 0 Fabienne Freymond Cantone Member 0 Peter Ochsner Member 0 Jean-François Schwarz Member 11 050 000 11 050 000 10 700 000 Total 11 415 000 11 415 000 0 11 065 000 Previous year 387 000 387 000 0 387 000
Executive Board Total 23 370 000 23 370 000 0 22 372 000 Previous year 20 276 000 20 276 000 0 19 476 000
Gérard Haeberli1) Member 10 579 000 10 579 000 0 10 487 000
1) Largest individual loan granted to an Executive Board member
No loans were granted to close relations (i.e., persons living under the same roof) of the members of the Board of Directors and Executive Board on terms not in keeping with market practice.
Loans to companies with links to members of governing bodies (in CHF)
No loans were granted to companies with links to members of governing bodies.
182 2019 Annual Report 183 Financial Statements – Parent Company Financial Statements
Share and option ownership
31 / 12 / 19 31 / 12 / 18 Shares Shares (in units) (in units) Board of Directors Jacques de Watteville Chairman 200 200 Reto Donatsch Vice Chairman 100 100 Jack Clemons Member 100 100 Ingrid Deltenre Member 174 174 Fabienne Freymond Cantone Member 51 25 Peter Ochsner Member 300 300 Schwarz Jean-François1 Member 3 691 Total 4 616 899
1) Not a member of the Board of Directors in 2018
Executive Board Pascal Kiener CEO 3 215 2 740 Stefan Bichsel Asset Management & Trading 5 000 4 590 Andreas Diemant Corporate Banking 417 176 Gérard Haeberli Private Banking 1 929 2 012 Christian Meixenberger Business Support 336 210 Thomas W. Paulsen CFO 1 143 937 Bertrand Sager Credit Management 4 166 3 795 José François Sierdo Retail Banking 2 339 1 852 Total 18 545 16 312
Members of the Board of Directors and Executive Board held no options at 31 December 2019.
5.17.2 Compensation and loans granted to former Retired Executive Board members continue to receive members of the Board of Directors and preferential terms that are in line with current market Executive Board practice for the banking industry.
Compensation of former members of the Board of Jean-François Schwarz, a retired Executive Board member Directors and Executive Board for the 2019 financial year who receives a pension from the “Caisse de pensions de la Banque Cantonale Vaudoise,” joined the Board of None. Directors on 1 January 2019 and will continue to receive preferential terms, in line with current market practice for Loans granted to former members of the Board the banking industry, on his fixed-term mortgage loans of Directors and Executive Board until they mature. He will receive no other preferential terms during his time in office, like the other members of Since 1 November 2002, serving members of the Board of the Board of Directors. Directors have not been granted any preferential terms for banking services, while former members who held office prior to this date continue to receive preferential terms that are in line with current market practice for the banking industry.
182 2019 Annual Report 183 Financial Statements – Parent Company Financial Statements
5.18 Breakdown of assets by solvency of the country group in which the risk is domiciled (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Internal country rating Standard & Poor's rating Absolute value as % of total Absolute value as % of total 1&2 AAA to AA- 2 832 82 2 868 83 3 A+ to A- 213 6 221 6 4 BBB+ to BBB- 55 2 113 3 5 BB+ to BB- 10 0 56 2 6 B+ to B- 281 8 154 4 7 CCC+ to C 23 1 32 1 Not rated Not rated 19 1 11 0 Net foreign exposure 3 433 100 3 455 100
5.19 Special “Caisse d’Epargne Cantonale Vaudoise” account (in CHF millions)
Guaranteed by the Canton of Vaud and managed by Banque Cantonale Vaudoise, by decree of 20 June 1995
2019 2018 Capital on deposit at 1 January 188.7 196.7 Movements: Net payment surplus during the financial year – 10.1 – 8.0 Capitalization of net interest at 31 December 0.0 0.0 Net change – 10.1 – 8.0 Total capital on deposit at 31 December 178.6 188.7 of which guaranteed by the Canton of Vaud 108.2 117.3
31 / 12 / 19 31 / 12 / 18 Change Breakdown by type of service Registered savings books and accounts 129.9 133.4 – 3.5 Senior citizens' savings books and accounts 26.9 31.7 – 4.8 Bearer savings books 21.1 22.7 – 1.7 Youth savings books and accounts 0.7 0.9 – 0.2 Total 178.6 188.7 – 10.1
184 2019 Annual Report 185 Financial Statements – Parent Company Financial Statements
6. Notes to off-balance-sheet transactions
6.1 Fiduciary transactions (in CHF millions)
31 / 12 / 19 31 / 12 / 18 Change Change absolute as % Fiduciary investments with third parties 368 198 171 86
6.2 Assets under management
As BCV is not required to disclose these figures, they are provided voluntarily and only on a consolidated basis (see note 11.4 to the consolidated financial statements).
184 2019 Annual Report 185 Financial Statements – Parent Company Financial Statements
7. Notes to the income statement
7.1 Refinancing of trading positions Negative interest 2019 2018 Change Change absolute as % Banks and reverse repurchase agreements 0.1 – 2.0 2.2 106 Customers 549.4 556.5 – 7.1 – 1 Interest and dividends on financial investments 27.7 30.9 – 3.2 – 10 Other interest income 11.5 9.5 2.1 22 Total interest income 588.7 594.8 – 6.1 – 1 Banks and repurchase agreements 20.5 16.9 3.6 21 Customers – 5.8 – 1.6 – 4.2 – 253 Medium-term notes and bonds 73.3 80.3 – 7.0 – 9 Other interest expense 11.0 10.1 0.9 9 Total interest expense 99.0 105.7 – 6.7 – 6 Net interest income before loan impairment charges/reversals 489.7 489.1 0.6 0
Negative interest paid by the Bank on its assets is deducted Negative interest received by the Bank on its liabilities is from interest and discount income. This negative interest deducted from interest expense. This negative interest totaled CHF 5.0m in 2019, against CHF 6.9m in 2018, and totaled CHF 42.6m in 2019, against CHF 38.3m in 2018, and relates mainly to deposits held with the Swiss National Bank, was earned on interbank positions, customer deposits, and interbank positions, and to a lesser extent funding transac- transactions related to structured product issuance. tions for trading positions.
7.2 Net trading income and fair-value adjustments (in CHF millions)
2019 2018 Change Change Breakdown by business sector absolute as % Retail Banking 17.1 17.3 – 0.2 – 1 Corporate Banking 9.8 9.7 0.1 1 Wealth Management 9.6 9.1 0.5 6 Trading 46.0 41.5 4.5 11 Corporate Center 33.9 38.2 – 4.3 – 11 Total 116.4 115.8 0.7 1
Trading income and fair-value adjustments Fixed-income instruments (including funds) 2.1 0.9 1.2 134 Equity securities (including funds) 20.6 17.2 3.5 20 Currencies and precious metals 100.7 104.4 – 3.7 – 4 Total trading income and fair-value adjustments 123.4 122.4 1.0 1 of which fair-value adjustments 20.3 17.1 3.2 18 of which fair-value adjustments on assets 192.7 – 126.6 319.3 252 of which fair-value adjustments on liabilities – 172.4 143.7 – 316.1 – 220 Trading fee expense – 7.0 – 6.7 0.3 5 Net trading income and fair-value adjustments 116.4 115.8 0.7 1
186 2019 Annual Report 187 Financial Statements – Parent Company Financial Statements
7.3 Personnel costs (in CHF millions)
2019 2018 Change Change absolute as % Fixed and variable compensation 228.6 223.9 4.7 2 of which charges related to share-based compensation and other variable compensation (including the portion paid in cash) 34.3 32.4 1.9 6 Employee benefits 23.3 22.4 0.9 4 Contributions to staff pension funds 33.0 32.4 0.7 2 Other personnel expenses 14.0 13.6 0.4 3 Total 299.0 292.3 6.7 2
7.4 Other operating expenses (in CHF millions)
2019 2018 Change Change absolute as % Premises 18.8 19.1 – 0.3 – 2 IT 68.3 69.6 – 1.3 – 2 Machinery, furniture, vehicles, etc. 3.2 3.5 – 0.3 – 8 Office supplies 1.0 1.0 – 0.0 – 2 Telecommunications and shipping 5.9 7.1 – 1.2 – 17 Marketing and communications, gifts and subscriptions 16.9 16.2 0.7 4 Financial information 12.3 11.8 0.5 4 Auditor fees 2.0 1.9 0.1 5 of which for financial and prudential audits 1.8 1.8 0.1 4 of which for other services 0.2 0.2 0.0 15 Other professional fees 3.6 3.8 – 0.2 – 6 Payment transactions 10.4 10.5 – 0.1 – 1 Issuing fees 1.1 1.0 0.1 12 Miscellaneous operating expenses 4.9 5.1 – 0.2 – 4 of which charges for the guarantee by the Canton of Vaud1 0.3 0.3 – 0.0 – 7 Total 148.4 150.6 – 2.2 – 1
1) Limited guarantee by the Canton of Vaud for deposits with the Caisse d'Epargne Cantonale Vaudoise, and managed by BCV
7.5 Other provisions and losses (in CHF millions)
2019 2018 Change Change absolute as % Provisions for credit risk 4.4 0.3 4.1 n/a Miscellaneous provisions 0.3 0.0 0.3 1 092 Miscellaneous losses 1.1 1.7 – 0.7 – 39 Total 5.8 2.0 3.8 185
186 2019 Annual Report 187 Financial Statements – Parent Company Financial Statements
7.6 Extraordinary income (in CHF millions)
2019 2018 Change Change absolute as % Disposals of equity holdings 0.2 0.3 – 0.1 – 44 Disposals of tangible fixed assets1 0.0 33.9 – 33.9 – 100 Other extraordinary income 0.5 0.7 – 0.2 – 28 Total 0.7 34.9 – 34.2 – 98
1) Proceeds from the sale of a piece of non-core real estate, which was finalized in 2018
7.7 Extraordinary expenses (in CHF millions) 2019 2018 Change Change absolute as % Miscellaneous extraordinary expenses 0.2 0.0 0.2 641 Total 0.2 0.0 0.2 641
7.8 Taxes (in CHF millions)
2019 2018 Change Change absolute as % Direct federal tax 28.2 27.2 1.0 4 Cantonal and municipal taxes 25.6 58.8 – 33.3 – 57 Total 53.8 86.0 – 32.2 – 37 Weighted average tax rate, based on operating profit 13% 21%
188 2019 Annual Report 189 Financial Statements – Parent Company Financial Statements
8. Proposal by the Board of Directors
At the Annual Shareholders’ Meeting to be held on 30 April 2020, the Board of Directors will recommend the following appropriation of profit and distributions:
The proposed allocation of available earnings of CHF 372.3m is as follows:
Dividend in CHF Number of shares Appropriation per registered share (in units) (in CHF millions) Payment of an ordinary dividend 36.00 8 606 190 309.8 Allocation to regulatory retained earnings 0.0 Allocation to optional retained earnings 62.4 372.3
If this resolution is adopted, the dividend will be payable, after deduction of Swiss withholding tax, at the Bank’s head office and branches beginning on 7 May 2020.
188 2019 Annual Report 189 Financial Statements – Parent Company Financial Statements
Statutory Auditor’s Report To the General Meeting of Banque Cantonale Vaudoise, Lausanne
Report on the Audit of the Parent Company Financial Statements
Opinion
We have audited the financial statements of Banque Cantonale Vaudoise, which comprise the balance sheet as at 31 December 2019, the income statement and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion the financial statements (pages 164 to 189) for the year ended 31 December 2019 comply with Swiss law and the company’s articles of incorporation.
Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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190 2019 Annual Report 191 Financial Statements – Parent Company Financial Statements
Methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans
Key Audit Matter Our response
Mortgages and loans are one of the bank’s main Our procedures consisted in particular in assessing and activities and represent approximately two thirds of its testing the key controls related to the granting, recording balance sheet as at 31 December 2019. The valuation and monitoring of mortgages and loans as well as the of a counterparty’s default risk relies largely on the use methodology used for the identification of default risk of rating methods developed by the bank. The and the valuation of the loan impairment charges. valuation of the related loan impairment charges relies on an analysis method that takes into account various For a sample of non-impaired exposures, we assessed elements such as market factors, the client’s estimated the debtors’ capacity to fulfil their obligations. We willingness to repay and financial capacity or the compared our findings with the assessment of the estimation of the collateral’s value. default risk performed by the bank using its counterparty rating process. The identification of risks and the valuation of the related loan impairment charges thus rely on models Regarding receivables that are considered as impaired and analyses that imply an element of judgement by or as presenting latent risks, our procedures consisted, the Board of Directors and Management. Exposures among others, of assessing the evolution of the relation that create greater uncertainty are typically those that between the loan impairment and the concerned result from unsecured loans or those that are subject receivables as a whole. For a sample of individual to a collateral’s loss of value. receivables that are considered as impaired or as presenting latent risks, we assessed the debtors’ financial standing as well as the valuation of collaterals and we compared our findings with the assumptions and factors taken into account by the bank when calculating the required loan impairment charges.
For further information on methods regarding identification and valuation of the value adjustments related to amounts due from customers and mortgage loans, refer to the following notes to the consolidated and parent company financial statements of Banque Cantonale Vaudoise as at 31 December 2019:
— Note 7.2 “Credit risk” (p. 123 to 125 of the Annual Report) — Note 5.2 “Risk mitigants for loans and off-balance-sheet transactions, impaired loans” (p. 169 of the Annual Report)
Responsibility of the Board of Directors for the Financial Statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.
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190 2019 Annual Report 191 Financial Statements – Parent Company Financial Statements
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. — Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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192 2019 Annual Report 193 Financial Statements – Parent Company Financial Statements
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings (page 189) complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.
KPMG SA
Olivier Gauderon Philippe Ruedin Licensed Audit Expert Licensed Audit Expert Auditor in Charge
Geneva, 6 March 2020
4 KPMG SA, Esplanade de Pont-Rouge 6, CH-1211 Genève 26
KPMG SA is a subsidiary of KPMG Holding SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.
192 2019 Annual Report 193 Organization Chart
As of 1 March 2020
Internal Audit Board of Directors Secretary P. Borcard J. de Watteville C. Monnier Chairman
CEO P. Kiener
Corporate Secretary Human Resources L. Gherardi L. Ebener
Strategy & Corporate Organization Communications J. A. Brinca D. Herrera
Finance & Risks Credit Management Corporate Banking Private Banking T. W. Paulsen B. Sager A. Diemant G. Haeberli
Private Banking Risk Management Credit Analysis – Retail SMEs Key Clients M. Mermier E. Allemann P.-A. Palley M. Schwitzguébel
Credit Analysis – SMEs Financial Accounting and Real-Estate Large Corporates Onshore M. Guerra Professionals P. Obrist Private Banking C. Zünd P. Botteron
Credit Analysis - International Controlling Trade Finance Large Corporates J.-B. Millais A. Krieger Private Banking E. Longchamp A. Croisier
Credit Analysis – ALM & Financial Independent Asset Corporate, TF, Country Management Managers and Bank C. Cherdel B. Rytz F. Manfredi
Compliance Credit Analysis Support J.-Y. Mathey-Doret E. Despont
Credit Recovery Legal Management P. L’Eplattenier F. Ausoni
Tax & Wealth Planning F. Welsch
194 2019 Annual Report 195 Asset Management & Retail Banking Business Support Trading J. F. Sierdo C. Meixenberger S. Bichsel
Retail Banking Asset IT Development Branch Offices Management S. Messin P. Moix M. Aubry
Digital & Investment Policy IT Systems Multichannel Banking F. Martins Management M. Charbonnel Da Silva D. Papeil
Facility Management & Trading General Services E. Vauthey J. Bourloud
Back Office O. Steffen
Global Custody P. Zufferey
Security J. Linder
194 2019 Annual Report 195 Retail Network
As of 1 March 2020
Avenches
Sainte-Croix Grandson Payerne
Yverdon-les-Bains
Orbe Vallorbe Lucens Chavornay
Moudon
Echallens
Le Sentier Cossonay Penthalaz Cheseaux Cugy Mézières Romanel Oron-la-Ville
Denges Chailly Savigny Morges Pully Aubonne Lutry Cully Saint-Prex Chexbres Blonay Vevey-Nestlé Château-d’Œx Rolle Vevey La Tour-de-Peilz Clarens Gland LAUSANNE Montreux LAKE GENEVA Crissier Epalinges Bussigny Signy Nyon Bellevaux Villeneuve Renens Prilly La Sallaz Bergières Les Diablerets Ecublens Chauderon CHUV Leysin Coppet UNIL- Saint-François Aigle Dorigny Gare Cour Villars Ouchy
Bex
196 2019 Annual Report 197 Regional Managers
As of 1 March 2020
Broye region Morges region Retail banking David Platel, a.i. Retail banking Philippe Diserens Private banking Hubert Joye Private banking Daniel Vuffray SME Julien Gander SME Patrick Blanc
Chablais region Nord vaudois region Retail banking Éric Barroud Retail banking Pascal Udry Private banking Vincent Mottier Private banking Adrian Kocher SME Sébastien Roduit SME Alexandre Berthoud
Gros-de-Vaud region Nyon region Retail banking Pascal Udry, a.i. Retail banking Jean-Daniel Dreifuss Private banking Pierre-Yves Zimmermann Private banking Jean-Michel Isoz SME Stéphane Binggeli SME Jean-Daniel Gebhard
Lausanne region Riviera region Retail banking Sébastien Rod Retail banking David Bressoud Private banking Pascal Aubry Private banking Christophe Millius SME Henri-Pierre Monney SME Didier Muller
Lavaux region Retail banking David Platel Private banking Olivier Engler SME Cédric Ottet
196 2019 Annual Report 197 Branch Offices
As of 1 March 2020 Broye region Gros-de-Vaud region CHUV Lausanne - St-François Rue du Bugnon 46 Place St-François 14 Avenches Cheseaux-sur-Lausanne Case postale 8 Case postale 300 Route de Lausanne 9 Rue du Pâquis 1 1011 Lausanne 1001 Lausanne Case postale Case postale 68 1580 Avenches 1033 Cheseaux-sur-Lausanne Crissier Lavaux region Centre MMM Lucens Cugy Case postale 210 Chailly Avenue de la Gare 4 A Centre commercial Migros Avenue de Chailly 10 1023 Crissier Case postale 69 Route de Bottens 1 Case postale 79 1522 Lucens Case postale 8 Écublens 1000 Lausanne 12 1053 Cugy Chemin du Croset 3 Payerne Case postale 47 Cully Rue du Temple 9 Echallens Place de l’Hôtel de Ville 7 1024 Écublens Case postale 64 Place de la Gare 7 Case postale 16 1530 Payerne Case postale 31 Épalinges 1096 Cully 1040 Echallens Place de la Croix-Blanche 17 Chablais region Case postale 119 Lutry Moudon Route de Lavaux 166 Aigle 1066 Épalinges Rue du Temple 10 Case postale 265 Rue du Collège 2 Case postale 32 La Sallaz 1095 Lutry Case postale 449 1510 Moudon Route d’Oron 2 1860 Aigle Case postale 32 Mézières Penthalaz Rue du Théâtre 2 Bex 1000 Lausanne 10 Place Centrale 3 Case postale 41 Rue Centrale 5 Case postale 7 Lausanne - Cour 1083 Mézières Case postale 62 1305 Penthalaz Avenue de Cour 38 A 1880 Bex Case postale 163 Oron-la-Ville Romanel Le Bourg 16 Château-d’Oex 1000 Lausanne 3 Centre commercial Romanel Case postale 103 Grand-Rue 82 en Félezin Lausanne - Gare 1610 Oron-la-Ville Case postale 172 Case postale 105 Place de la Gare 10 1660 Château-d’Oex 1032 Romanel Case postale 192 Pully Rue de la Poste 8 Les Diablerets 1001 Lausanne Lausanne region Case postale 62 Les Ormonts 7 Ouchy 1009 Pully Case postale 28 Bellevaux Avenue d’Ouchy 76 1865 Les Diablerets Route Aloys-Fauquez 116 1006 Lausanne Savigny 1000 Lausanne 8 Place du Forum 2 Leysin Prilly Case postale 120 Place du Marché Bergières Route de Cossonay 21 1073 Savigny Case postale 83 Avenue Bergières 42 Case postale 48 1854 Leysin Case postale 60 1008 Prilly Morges region 1000 Lausanne 22 Villars Renens Aubonne Avenue Centrale 119 Bussigny Rue du Midi 15 Chemin du Mont-Blanc 2 Case postale 7 Rue St-Germain 2 A Case postale 608 Case postale 37 1884 Villars Case postale 44 1020 Renens 1170 Aubonne 1030 Bussigny Villeneuve UNIL Cossonay Grand-Rue 1 Chauderon Internef - Dorigny Rue des Etangs 5 Case postale 27 Place Chauderon 8 Case postale 125 Case postale 35 1844 Villeneuve Case postale 300 1015 Lausanne 1304 Cossonay-Ville 1001 Lausanne
198 2019 Annual Report 199 Denges Nyon region Vevey - Gare Route de Genève 107 B Place de la Gare Coppet Case postale 74 Case postale 160 Rue Froide 1 1026 Denges 1800 Vevey 1 Case postale 30 Morges Hôtel-de-Ville 1296 Coppet Vevey - Nestlé Place de l’Hôtel-de-Ville 2 Avenue Nestlé 55 Gland Case postale 144 Case postale 353 Avenue du Mont-Blanc 14 A 1110 Morges 1 1800 Vevey 1 Case postale 338 St-Prex 1196 Gland Route de Rolle 2 Nyon Case postale 24 Rue Perdtemps 6 1162 St-Prex Case postale 1048 Nord vaudois region 1260 Nyon 1 Chavornay Rolle Route d’Yverdon 2 Grand-Rue 60 Case postale 62 Case postale 1208 1373 Chavornay 1180 Rolle Grandson Signy Place du Château 8 Centre Commercial Case postale 24 Rue des Fléchères 7 A 1422 Grandson Case postale 245 1274 Signy-Centre Le Sentier Grand-Rue 36 Riviera region Case postale 62 Blonay 1347 Le Sentier Route du Village 7 Orbe Case postale 91 Place du Marché 9 1807 Blonay Case postale 27 Chexbres 1350 Orbe Grand-Rue Ste-Croix Case postale 113 Rue Neuve 2 1071 Chexbres Case postale 17 Clarens 1450 Ste-Croix Avenue Vinet 15 Vallorbe Case postale 51 Rue de l’Horloge 1 1815 Clarens Case postale 36 La Tour-de-Peilz 1337 Vallorbe Grand-Rue 38 Yverdon-les-Bains Case postale 64 Rue des Remparts 17 1814 La Tour-de-Peilz Case postale 256 Montreux 1400 Yverdon-les-Bains 1 Grand-Rue 50 Case postale 1026 1820 Montreux
198 2019 Annual Report 199 200 2019 Annual Report PB Thanks BCV would like to thank its employees as well as the various external service providers involved in preparing this document.
Project management and content Gregory Duong
Graphics and graphic design Nicole Robertson Dominique Scholl
Photographs Thierry Jayet, Marc Döbler Jean-Bernard Sieber
Photo editing Images3 SA, Renens
English translations and adaptations BCV Translations Team, with the collaboration of the following freelance translators: Larry Cohen Chris Durban Dylan Gee Christopher Scala Rosie Wells
This document is an English translation of the original French text entitled “Rapport annuel 2019.” Only the French text is authoritative.
Printing Imprimerie Baudat L’Orient
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